When you deal with the public and take personal checks, it’s difficult to totally avoid bad checks. Thanks to continually improved technology, however, you can limit your loss experience by using specialized vendors.
The cheapest and easiest way to nip a bad check problem is at the source – don’t take any bad checks. Although you can alert your clerks through training about identifying bad checks, it’s a sure bet you’ll still miss a few.
If you’ve tried training and still have a problem, it’s likely you need a check verification and collection service. With verification systems, checks are run through a verification machine which is connected to major national databases through a modem. Most systems use your credit card “swipe” machine to send and receive data.
Some of the services offered in check verification systems include:
Velocity Tracking – designed to limit the number and dollar amounts of checks by tracking account numbers and “cash back” transactions. Stores are provided with warnings on high velocity items.
Negative Database – includes NSF checks, closed accounts, stolen, forged and stop payment information.
Positive Database – allows you to set higher dollar limits and velocity on “good” customers that may be above usual store limits.
Low Check Number Tracking – automatically issues a warning on checks numbered less than 1000.
First Time Check Writer – a feature to identify the first time user at your stores. You can also use this warning to show appreciation to your first time customer.
Verification systems vary in effectiveness. It pays to shop. Most reputable verification software companies are linked to national database systems, but some have a distinct advantage in your local area due to contracts with local government agencies and other high-volume area merchants. Always get references and see who else in your area is on-line with the service you are considering.
Pricing of services can also run the gamut – from percentage of check dollar amount to unit or per check charges and every combination in between. Get bids.
Despite a verification system, a few bad checks may still get into your hands. This is when a good collector comes in handy. Some verification providers offer this service in one package, or you may want to contract separately for your collections.
Again, pricing, effectiveness, and courtesy varies widely, so watch who you do business with! (Courtesy of collectors is an extremely important point if you want to keep normally good customers who just happened to make an error on their account one day.) Effective companies won’t be afraid to guarantee their loss ratio.