Small Business Tips: The Pros And Cons Of Accepting Checks

Brief article outlining advantages and disadvantages of accepting personal checks. Guidelines for verifying identity, and securing payment.Tips on using observations as a guide.

If your business is like other small businesses, then one of your main concerns is probably repeat customers. Repeat customers are the basis of your enterprise. They are who pays your monthly expenses, and you would do well to keep them happy at all costs.

One of the ways that businesses help guarantee return customers is by being flexible with payment options. The business that is rigid and strict about payment options may find their customers out shopping for greener pastures, so to speak.

One of the most common options for payment is a personal check. A personal check is a promissory note. It guarantees the vendor that the customer has the funds to pay for the purchase, and trusts that payment will be made. Accepting checks can be very good for a small business, as it doesn't require the expense, however small, of using credit cards. Personal checks, made out in the exact amount of the purchase, can sometimes mean the difference between an immediate sale and a return trip with cash. As I'm sure you realize, that return trip cannot be counted as a sale until it actually happens. If you are an online retailer, offering the option of paying with personal check opens up avenues of revenue between you and the population of folks who may be a little wary about giving out credit card information over the web. This is a part of the public who, no matter how many explanations on encryption you provide, is just not comfortable about sending out personal information over the computer. They are well served by merchants who accept personal checks. Remember, you have the option of delaying delivery until the check clears.

For the real-time business, however, there is more of a risk involved with handling personal checks. The reality of insufficient funds hangs over the purchase. It is common practice to ask for a customer's telephone number, if it isn't preprinted on the check, and a glance at your customer's driver's license will provide you with the Driver I.D. number, which you may need to collect payment if the check is bad. Many businesses, when handling a check which has been returned, will charge a twenty or thirty dollar bank fee, in addition to collecting the amount owed. Usually a phone call to the party involved clears things up, but in some cases, actual prosecution is required. This procedure varies from state to state, but passing a bad check is a federal offense. There are ways small businesses try to avoid doing business by check. These include offering a cash discount, and requiring all funds paid by check to be presented at the start of a job or order, giving the business time to contact the bank and make sure the funds will be available.

At one time or another, your business will be asked to accept a personal check. You must sometimes rely on personal observation, customer potential, and choice of credentials. If you ask for identification, and are presented with nothing more than a library card, a decision to only accept cash may be made on the spot. However, if your customer does not hesitate to provide you with a valid driver's license, a preprinted check with name, address, and phone number corresponding, and perhaps a valid major credit card, you may decide to deem that person credit worthy. Being a small business lends you the opportunity to decide on a person to person basis whether or not to accept a personal check. Post these requirements in a highly visible spot, and do not waver. Remember, it is better to lose a bad customer than to keep one.

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