6 Useful Tips To Avoid Bad Cheque Headaches

Presenting a cbad' cheque can cause major headaches for your business

. Firstly, it inefficiently allocates your time away from core business and also can negatively impact cash flow. There are various reasons a cheque would not be accepted by the bank. Reasons can range from insufficient funds in the account (most common) to embezzlement and fraud. Although you can alleviate the effects of 'bad' cheques by outsourcing the recovery over to a debt collection company, it is always better to avoid the 'bad' cheque headache at the initial stage. This will save time in the future.

There are numerous precautions you can take in deciding whether or not to accept a cheque. Have a look at these six useful tips and make sure your staff or finance teamunderstands the need to follow the guidelines.

Screen potential customers

New customers are of course that unknown element in business. Statistics show that the majority of 'bad' debts come from new clients as opposed to clients you have been dealing with for a long period of time.By spending time in the initial stages through business due diligence and screening measures, can minimise the risk of dealing with potentially troublesome clients.

Have new clients fill out a credit application form with relevant contact details. Verify contact details for all future correspondence. Trade references are also a useful tool which can be used to determine the payment credibility of the new client.

Debt Collection Agencies can also provide you with valuable credit reporting tools which may assist with this initial screening.

Only accept cheques if you can verify identity

For anyone that walks off the street it is imperative that you can verify their identity before accepting a cheque. Make sure you have sighted some form of photo identification and confirm their signature on the cheque is similar to the identification.

Check the cheque

Be thorough in checking every factor of the hand written cheque. Look for obvious signs of fraud, crossed out words or if it is post dated. The payee name should be the same as your bank account name and never accept a cheque that is made out to someone else.

Obviously a good counterfeit cheque will be hard to spot and they are thankfully less likely to surface. But be familiar with what a cheque should look like from all the major banks and credit unions. You should also be mindful on the signature requirements. Some cheques may require one signature and some may require two. Incorrect execution of cheques may result in the non-clearance of funds.

Errors and corrections

Errors or corrections of any kind should also be initialled by all signatories of the cheque.

Obvious corrections, words and dollar amounts with a strike through line but without initials could mean the cheque has been stolen or is being misrepresented.

Follow up with the bank

If you are not convinced in any way that the cheque you have is genuine or if you have any doubts as to whether the customer has sufficient funds then make a phone call to the bank. All cheques have the branch of the bank detailed on them so it is as easy as a phone call. For transactions of large amounts it makes sense to get that reassurance.

Educate staff

It is imperative that every member of your staff or anyone that conducts sales transactions on your behalf has a thorough understanding of your guidelines for accepting cheques.

In these days of credit cards and EFTPOS transactions there a few cheques being presented. But for those times when you do receive a cheque spend those moments making sure it will be honoured for a headache free sale and avoid future debt recovery hassle.

by: John Zukerman

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