Dealing with bad checks can be a big headache for small businesses. That’s why the easiest way to handle bad checks is to make sure that customers don’t write them in the first place. Here are some simple steps that will both help you avoid bad checks and make it easier to collect payment later on:
Get an address. First, have the customer sign the check in your presence and make sure that the customer’s phone number and address appear somewhere on the check. If the customer has an address that doesn’t appear to be permanent or that would make it difficult to trace her later on—e.g. a hotel room or a post office box—think carefully before accepting the check.
Avoid post-dated checks. Next, examine the check carefully before accepting it. Beware of checks with crossed out or rewritten marks. Check the date to see if it’s accurate. If you must accept a post-dated check (which can’t be deposited immediately), be very careful. In some states, the writer of a post-dated check cannot be held liable for writing a bad check.
Confirm identity. Collect identification such as driver’s licenses when taking checks. You may wish to write down the customer’s driver’s license number on the check.
Remember, you don’t have to accept checks. You can always require customers to pay with cash. To avoid a discrimination claim, you must apply your check policy consistently to all customers.
Senior Executive Counsel
NFIB Small Business Legal Center
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