Keeping Tabs on Bad Checks (10/16)

Keeping Tabs on Bad Checks

While checks are an easy form of payment, they can be a burden if they bounce. Each year more than 450 million fraudulent checks are written in the United States. As a result, small business owners must spend a lot of time and money to recover the funds they are owed.

All in all, it's estimated that rubber-check passers walk off with goods and services worth an estimated $850 million a year on bad credit. Although the American Bankers Association reassures that only a fraction of checks written are bad - about one check in 60,000 - even one overdraft check can tie up crucial resources that a small business might find difficult to spare.

Recovering the original money owed isn't an easy process, either. After spending time to chase down a check signer in-house, then turning it over to a professional collection agency, a small business can find that it has lost money on the sale, especially after paying the hefty percentage that the collection agency usually takes as payment.

Yet, short of refusing to accept payments by check, small business owners can't do much to completely ward off the bad omens that a bounced check can signify. However, according to the Los Angeles County District Attorney's Office, there are some telltale signs to look for when keeping an eye out for faulty checks:

Does the check have a low number or no printed number? About 90 percent of bad checks are drawn on new accounts. If check numbers are lower than 125 or are handwritten, use extra caution.
Is the date on the check accurate?
Does the written amount match the numerical amount?
Does the name of the payee appear to have been changed?
Is the check imprinted? Does the signature match?
Always insist on identification. Write the information on the front of the check. Bank stamps may cover up valuable information written on the back of checks. Also write the initials of the check receiver on the front of the check.