Guide to Handling Bounced Checks

If yours is a retail business, take steps to avoid bad checks

Accept local checks with a preprinted name and address. Require that checks are written and signed in your presence. Don't accept third-party or post-dated checks, and verify large checks with the issuing bank.

I recommend: Telecheck, Cross-check and Echo all provide check verification services you can subscribe to. You might also consider PayPal if you are an Internet business.

Contact customers who write a bad check

Nearly everyone bounces a check from time to time by mistake. Have your bookkeeper confirm with the check issuer that this wasn't a mistake. Ask for immediate replacement of the check. Make sure your sales team doesn't continue to offer products to customers who have issued checks with insufficient funds to cover them.

I recommend: Find Accounting Software can help you find software that automatically alerts all departments to trouble with a client.

Employ electronic check re-presentment

Checks go through the traditional clearing process only twice, but electronic check re-presentment gives you a third chance to get paid.

I recommend: Contact The Electronic Payments Association (NACHA) for more information.

Consider small claims court

If the balance is small you can go to small claims court without an attorney.

I recommend: Lawguru.com offers answers to most simple questions regarding filing and collecting with small claims. Each state has its own FAQ and/or forms area on the Web for Small Claims.

Use collection agents to recoup

If you're having trouble collecting from clients, call a collections agent. Get a collection agency specialist to help you out.

I recommend: Find one at The Association of Credit & Collection Professionals.