The information age makes it easier to verify that a client’s check and other forms of payment are good.
Do you trust every person who pays for her salon services with a check? Accepting checks is risky business, but not accepting them can limit your business. Offering that payment option and others such as credit card, ATM, or debit payment can open the door to increased business. Ensuring that these payment can open the door to increased business. Ensuring that these payment alternatives are not fraudulent is becoming easier, thanks to communication networks and advanced technology.
Ella Silvestri, owner of Nouveaux Nails in Action, Mass., says, “I don’t think you can prevent bounced checks unless you run a cash-only business. This would prove to be very limiting as well as inconvenient.”
But not accepting checks or making it difficult for customers to pay for purchases by check can be even costlier to your business . According to Equifax Check Services (formerly Telecredit), 72% of American shoppers prefer paying with personal checks, 59% would shop at a particular store more often if checks were accepted, and 40% would spend more on each visit if they could pay by check.
It’s a rare salon that hasn’t encountered one or two episodes of a bad check. Not only is it financially uncomfortable, it’s embarrassing for you to have to go after the money. But there are ways to ensure that the checks you accept are good.
RETURNED FOR INSUFFICIENT FUNDS
CHECK BEFORE YOU ACCEPT A CHECK
If you accepted a check from a client and suspect that might not clear, you can call the issuing bank to see if there are sufficient funds in her account. Call before depositing it, because once you send a check to your bank, you may not be able to re-deposit it if it bounces, and most banks limit the number of times you can put a check through.
Mary Everett, owner of Nails by Mary in Panama City, Fla., thinks it’s more important that a client come in when she needs a fill rather than when she can afford it. “I allow them to post-date their checks or pay me later. I bill weekly, and so far I’ve only had to write $20 off as bad debt,” she says.
“I’ve had two bad checks written to me, and both times I had a bad feeling when I accepted them,” says Joanne Boice of Capelli Hair Salon in La Mesa, Calif. Having a check verification system in place can prevent that initial hesitation.
There are a few ways you can ensure that a check is good before you accept it. One way is to call the bank issuing the check to see if the funds are there (although there’s no guarantee that the money will be there when your check arrives). You can be doing this as the client is scrubbing up in the restroom if you’re uncomfortable about doing so in front of her.
Another way to ensure a check is good is to employ one of the check management or check-guarantee services available to businesses. These services work as a sort of insurance against lost income due to bad checks. For a monthly service fee, they will approve or disapprove every check; if one they’ve approved bounces, they will pay you its value.
Equifax Check Services and TeleCheck both guarantee 100% payment of checks that are deemed acceptable by them, and both offer optional methods for accessing their services. As long as you follow their check acceptance policies, they will guarantee that you’ll get payment on the checks you cash. To shop around for a check-protection company, look in the yellow pages under “Check Cashing Protection Systems.”
You can access these services several ways: your touch-tone phone, a computerized cash register that has a modem, or a point-of-sale terminal. When you use your touch-tone phone, you simply call a phone number that TeleCheck or Equifax provides you. You will be prompted for the customer’s driver’s license number and state of issue, birth date, and the check amount, which you punch in on the phone. The TeleCheck or Equifax computer searches for any record of a problem with the check writer---such as a history of bad checks, or whether this person has written a lot of checks in a short period of time.
If the check is approved, you will be given an authorization number. The whole procedure takes less than a minute.
The charge for the check management service is usually based on the total dollar amount of checks guaranteed each month, but it can also be based on a minimum monthly amount. But what if you don’t want to make a telephone call to the service every time someone pays with a check? You have another option: an electronic point-of-sale terminal or an electronic cash register. The terminal is connected via your existing telephone line to a check management service company’s central computer. The machine will automatically dial the company and you simply punch in the requested information.
You may also purchase a check render that will scan the check and immediately inform you if the check is approved or not. You don’t have to ask for identification as the check is the identification. Again, if the check is approved and it subsequently bounces, you are guaranteed payment. The check reader is hooked up to your existing telephone line, or you can arrange to have a separate (dedicated) telephone line for the terminal. Such a machine can cost $200-$300 for initial setup, installation, and training , and you will be charged a minimum monthly fee or a rate based on your check volume (probably around $50 for a small salon). Payment plans are available.
WHAT TO DO WHEN YOU GET A BAD CHECK
It’s as embarrassing for an otherwise conscientious client to bounce a check as it is for you to have to inform her. But often enough, clients will ask you to wait before depositing their check or will ask if they can post-date their check. Other clients will call after writing a bad check and ask you to hold it. Most clients, when notified, will apologize and send you the money.
Still, there are times when you’ll have to work at getting what’s owed to you. Cindy Chatfield , owner of The Nail Image in Cincinnatti, Ohio, twice had to send out official olice letters to go after bad check writers. “If you call the local police and ask, they’ll send you form letters that you can mail to clients. The letter explains what can happen if you write a bad check and that it’s against the law. It also states that the customer has 10 days to pay or else she can be put on a police report,” she says.
Sending out the threatening letters worked for Chatfield. “Both clients paid, but one didn’t pay the bounced check fee. But I was glad just to get the money,” she says.
CREDIT CARDS ARE USEFUL
Obviously, credit cards are an alternative to checks. Sharon Brown, owner of Downtown Nail Gallery in Dallas, Texas, doesn’t currently accept credit cards, but she plans to. She is expanding her business to offer skin, hair, and men’s services. When that happens, she says, “I’m going to accept credit cards. If the service bill is running high, most clients will want to put it on their credit card.”
Brown also points out that business goes up or down depending on the time of the month when you only accept checks or cash. “People start making their appointments after payday. The first of the month is a little drier---that’s when most people have their car payments, rent or mortgage due.”
With the old “slide” style credit card receipt imprinters, you still can get stuck with a fraudulent card, not to mention all the work sending in the credit card payment envelopes to your bank and waiting a month before you see any money.
Many financial institutions offer electronic credit card approval and deposit services to their merchant account holders for a small fee. When you open a business account with your bank, you will be given a merchant number. Every time you accept a credit card at the salon for payment, you call your bank’s merchant services number, punch in your merchant number, and punch in the number of the client’s credit card. You will be told if the card should be accepted or not. Usually this service is offered for Visa and MasterCard credit cards only.
Your financial institution may offer you the option of renting a card reader, which is hooked up to a telephone line. When you swipe a credit card through the reader, you are told immediately if the card is accepted or not. Chatfield rents a card reader from her bank, which offers the card reader as part of its merchant package for $35 a month. At the end of her business day, the funds are automatically transferred from the client’s credit institution to Chatfield’s business account.
If, for some reason, you are unable to obtain such a credit card approval service from your bank, you can deal directly with a credit charge service company. There are many such companies that cater to small businesses and new businesses. They are listed in the phone book under “Credit Card Services.”
In many cases the machines they use are the same machines a bank would provide you. The company will charge you for the machine itself, installation, training, any for any supplies such as the printer (the machine prints out a receipt for you and your client). Hooked up to your telephone line, the machine automatically dials a central computer transfers the funds directly to your account if accepted. The company charges a percentage of each credit card transaction, for instance 1.55%, plus a set amount per transaction, perhaps 20c.
Some credit card machines come with a PIN pad so that clients can use their debit card or ATM card. In this case, you are charged more per transaction---around 50c. Some machines approve checks as well. You punch in the client’s driver's license number and the machine tells you if the check is approved.
The monthly cost you pay for check and credit card verification services may save you a larger loss from bounced checks. And keep in mind that any extra service---even the way you allow clients to pay for services---differentiates you. With the check reader and the credit card reader machines, you can process payments faster and with less hassle, be reimbursed almost immediately, and encourage more spending in your salon.