Accepting Check Payments at Your Small Business

As a small business owner, you can offer several payment options to your customers. One way to receive money is by accepting check payments. To broaden payment options for your company, you need to know how to accept personal checks.

How to accept check payments

If you decide to accept checks, keep some key points in mind for your small business. Follow a few simple steps to collect valid checks and correctly deposit them.

When you receive a check, verify that it was written for the right amount. The numerical amount and the amount written out should be the same. Do not accept checks for more than the total amount due.

The check must include personal and banking information. The following details should be correctly written or printed on the check:

  • Complete name of the payer
  • Current date
  • Bank ID numbers including account and routing/ABA numbers
  • Payee name (you or your business)
  • Dollar amount
  • Signature

Once you verify the information, deposit the check as quickly as possible. Obviously, the faster you deposit the check, the faster you get paid. You also don’t want to wait too long because some banks won’t let you deposit checks after a certain number of months. Be timely with check deposits to maintain a healthy small business cash flow, and be sure you’re receiving good checks.

Check acceptance policy

Create a check policy if you plan on accepting checks for payment. The check acceptance policy will help you identify and avoid non-sufficient funds (NSF) checks at your business. The policy should outline how you and your employees handle check acceptance and deposits.

Train employees on the check acceptance procedures and how to handle checks. Be sure that you and your employees know how to spot a bad check.

Accepting checks online

An online check, or e-check, is a type of electronic funds transfer processed through an ACH (automated clearing house) system. The payment is made through the internet or another data network.

Online check processing turns a paper check into an electronic transfer. The check is deposited into your account automatically, so you get paid instantly.

E-checks are processed like credit cards but have lower fees. The customer writes a paper check at the point of sale, and you swipe it into a machine. The reader captures the information on the check. You can enter additional information to complete a one-time payment from the customer’s account.

Accepting checks online can also be done on your website. A customer enters the routing and bank account numbers on your website, along with other relevant information. The check is processed online, and you receive payment immediately. This makes it easy and convenient to accept electronic check payments from customers.

Online check processing usually offers several security features for your business. These features include authentication, digital signatures, and encryption. Depending on the payment processor, the check is verified at the point of sale. That way, you know if the check is good before the customer leaves your business.

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Pros and cons of accepting check payments

Accepting checks can be beneficial for many small business owners. But, when you accept personal checks, your business could also face some challenges. Take a look at the pros and cons of accepting check payments.

Pros of accepting checks

The following are ways check payments could benefit your business.

Pay lower processing fees

Personal checks usually cost a business less than credit and debit cards. To accept credit and debit card payments, you must use a card processor. Card merchants charge a percentage of each sale made on a credit or debit card.

Usually, paper checks do not have fees associated with depositing money. And, online check processing fees are lower than credit and debit cards.

Widen your customer reach

Checks could open your business up to a new customer market. Accepting checks at your business gives customers another payment option. Some people prefer to pay with checks. By accepting checks, customers don’t need to carry a lot of cash or charge the amount to a credit card.

Increase your B2B sales

Certain kinds of customers tend to pay with checks more often than others. For example, many businesses prefer to pay their suppliers with checks. If you make mostly business-to-business sales, you might benefit from accepting check payments.

Cons of accepting checks

Consider these disadvantages before accepting checks at your business.

It takes longer to get cash

When a customer pays with a paper check, you don’t instantly have money in your hand or bank account. You have to take extra steps to deposit the check. Accepting checks adds more to your to-do list and takes time away from other business tasks.

Checks can be inconvenient

Some customers don’t like check payments, carry a checkbook, or want to fill out checks to make purchases. If you limit options to accepting cash and check payments, you could end up turning away customers who want to use credit cards.

Not all checks are good

Sometimes, checks bounce because the account is closed or has insufficient funds. When a check bounces, you do not receive money. You have to track down the customer and collect payment from them. The collection process can be a hassle. You might not ever be able to collect money for the bad check, which means you don’t get paid for the good or service you provided. You might have to write it off as bad debt.

Need a simple way to track checks and other payments made to your business? Patriot’s online accounting software is easy-to-use and affordable. We offer free, USA-based support. Try it for free today!

This article has been updated from its original publication date of July 18, 2017.

This is not intended as legal advice; for more information, please click here.

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