I own a small business that accepts checks. The business does absolutely no billing. I get a few bounced checks each month and it is a PIA. Since I do no billing there is no employee responsible to handle accounts with a balance. People who pay with a bad check are called and given 72 hours to make the account good, those that are not paid after 72 hours get sent to a collection agency.
Can someone with experience with a check guarantee company explain how they work? Is there a formula that would tell me if I would benefit by using such a company? Are companies that do this type of thing easy to work with? I admit to being a lousy business person, but if there is a formula I could have my accountant or office manager dig up the numbers.
Gracias.
I am a manager of a small, locally owned business. We accept checks, and take in several every day. We have used several check guarantee services since we have been open, and all of them work in pretty much the same way.
You sign an agreement with the check guarantee company. Basically this agreement states that you will pay a percentage of all the checks you accept in one month to the guarantee company. I have seen this percentage go anywhere from 1.5% to as much as 3%. In exchange for this, if someone bounces a check, you simply forward that check to the guarantee company. When the guarantee company verifies that you followed their standards of check acceptance, such as recording the check writer’s ID, phone number, etc, they will reimburse you for the bad check.
When you use a guarantee service, you will be given a terminal that either scans the check, or prompts you to key in information manually. This serves two purposes. First, it will check the guarantee company’s database to make sure they have no record of bad checks being written from that account or ID number. If you accept a check that the terminal declines, obviously you will not be reimbursed for that check should it bounce. Second, this also allows the company to keep track of the total dollar amount you receive in checks every month, allowing them to bill you accordingly.
To really simplify things, you can submit a request to your bank stating that every time a check bounces, it is to be forwarded directly to the guarantee company. This eliminates the need to send off the check yourself, and should decrease the amount of time you have to wait to get paid.
To determine if a check guarantee service would be good for your business you must decide if the total dollar amount of bad checks you receive in any given month would be greater than the percentage charged by the guarantee company. Shop around, as many services offer vastly different rates for different services. Some companies offer cheaper rates, but will only guarantee checks up to a certain dollar amount. Others will allow you to accept checks of any amount, but place more restrictions upon you. Don’t settle for the first company you talk to, as there may be better options.
Thanks, Unkempt One. I especially like the idea of the bounced check going directly to the company.