Money Matters

Preventing Bad Checks

Gathering adequate information helps you spot bad checks – and recover funds when checks bounce.

The only way to avoid bad checks is to refuse to accept all checks, good and bad. But that obviously isn’t good business. Gary Ahlquist, president of Tensorlon Consulting and Training Services (Chattanooga, Tenn.), says, “If you accept checks, there’s no way to prevent getting a bad one.” You can least afford to receive a bad check during recessionary times, although you may find an increase in them as clients find themselves pressed cash. It’s a good idea to develop an acceptance policy to decrease your odds of receiving a bad check and to give you the information you need to contact the client should the check bounce.

ACCEPTING CHECKS

Every salon should develop and post a check acceptance policy for employees’ reference at the reception desk. You should check the following points when accepting a check.

Glance over the check itself. Checks should be preprinted with the customer’s complete name and address (no P.O. boxes). Also, get the customer’s place of employment and a work phone number. The date must be current, never postdated or more than 30 days old. The payee must be your salon, and the written and numeral amounts must match. If the numerals read $20 and the written amount says “two dollars,” for example, the bank will pay only $2. The bank name and address should be printed on the check; in addition, there should be bank identification number in small print in the upper right-hand corner. Bank and customer computer numbers must be printed on the check at the bottom. Finally, be sure the customer signs the check in your presence. These points will help you ensure the check is valid.

While there are national check guarantee services available, most salons probably don’t need them. For one thing, salon employees know most, if not all, of there clients. Secondly, salons receive so few bad checks that getting the service isn’t cost-effective.

Ask to see new customers’ identification once you’re satisfied the check is filled out properly. Asking for identification protects both the customer and the salon. Acceptable types of identification are a current driver’s license, a state identification card, military ID, or a current employment ID with photograph. Make sure the signature on the check matches the signature on the ID. You can ask to see a credit card, another card with a photograph or signature or a bank check guarantee card as secondary identification. However, if you ask for a credit card, you may not copy down the account number.

If your salon is computerized, you can save some time by recording clients’ identification information in their client file. “We’re computerized, so we load the driver’s license number, address, day phone number, and evening phone number into the computer and keep it on file,” says Carol Shanks, manager of Salon Career Track and Figaro’s European Coiffures (Denver, Colo). “All we do is double-check the address and phone numbers each time the client comes in to keep the information update. Then, when our customers come in to pay with a check, we don’t have to get the information each time.”

If your salon doesn’t have a computer, log the information in a notebook. “Keep a logbook at the front desk for checks and record the information the customer gives you. Create a form that includes the driver’s license number, expiration date, home and work numbers, and address,” says Ahlquist. “If you get a bad check, the bank may not send it to you, but may send it to the customer, so you need to have the information on hand. Or, the check may come back to you but may be covered with so many [bank] stamps you can’t read the information.

“What you’re doing is creating your own ‘hot list,’ ” continues Ahlquist. “When the checks clear, you can check them off in the log book. You also have a place to look at the status of a client’s previous checks.”

REFUSING CHECKS

You are not obligated to accept checks. But if you refuse them, you should be able to tell the client why. Perhaps your policy is not to take out-of-state checks, but you cannot discriminate against certain clients, such as students or clients who live in a bad neighborhood. “It’s very difficult to tell whether a check is good or not, or whether a client you’ve never seen before is a bad check passer,” says Shanks. “The only thing you can do is verify the client’s identity.

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