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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If you’re worried about getting a bad check, ask for another form of payment. “To protect yourself, encourage the use of credit cards,” says Ahlquist. “Another thing salons can do is set a limit for checks, say under $50 or $70, and anything over that amount must be paid for with a credit card or cash. That limits your loss.”

IF THE CHECK’S BAD

Everyone bounces a check occasionally, and most people want to make the check good as quickly as possible. “When we get a check back from the bank, we call the customer right away,” says Shanks. “The customers are usually appalled that the check bounced, and the funds are made up within a week.” You can let the customer know you’re going to redeposit the check, and you can call the customer’s bank to ask if sufficient funds are available in the account before you redeposit the check.

If the check comes back a second time, contact the client again and ask that she come to the salon with cash or a credit card to make a good payment. Most customers whose checks bounce twice solve the problem this way, and rarely is any further action necessary.

If you get the check back again or the client is uncooperative, you have to take stronger action. “You have two choices,” says Ahlquist. “You can recover the funds yourself or you can use a check recovery service,” If you decide to recover the funds yourself, the first step is to write a letter to the client.

“Develop a form letter saying the check has been sent through the bank and declined. Tell the client you want immediate payment, stating the law and its code number. Give the client a time frame to get hold of you, usually 48 hours. If the check is paid by then, you will take no further action. Then, send the letter by registered mail,” advises Ahlquist. “If there has been no response after 48 hours, take the receipt to the police. The police will issue a warrant for the person and when they catch the customer, you go to small claims court to recover the money.”

CHECK RECOVERY SERVICES

Ahlquist recommends using a check recovery service. “Most good-sized cities have them,” says Ahlquist. “I recommend them because most salons are not diligent, and you must stay on top of a bad check.”

Your district attorney’s office may have a Bad Check Enforcement Program for businesses that want to recover funds lost from a bad check. The district attorney’s office usually requires that a business owner submit the check to the bank twice or requires the face value of the check to be a minimum amount. Your local Chamber of Commerce will have the details.

STAY ON IT

The bottom line for recovering funds is to be prompt and thorough in dealing with bounced checks. It isn’t necessary to take a tough stance about accepting checks – but it is necessary to be tough when you get a bad check from an uncooperative customer. Whether you recover the funds yourself or have someone else do it for you, be firm. The business that earns the reputation for being easy-going about a bad check will soon have plenty to worry about.

What to look for when accepting checks:

  1. Must be personalized – complete name and address preprinted by the bank (no P.O. boxes)
  2. Date must be current, never post dated or more than 30 days old.
  3. Bank ID #
  4. Payee must be your company.
  5. Written and numerical amounts must be the same.
  6. Bank name and address must be printed on check.
  7. Bank and customer computer numbers must be printed on check.
  8. Customer signature – must be signed in your presence.

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