Tips For Small Businesses To Collect NSF/Bad Checks

Most businesses accept only debit or credit card payments as many transactions are complete over the phone or online.  For customer facing businesses such as retail companies, accepting checks is another common payment method.

When checks are written to a business and fail to be deposited due to insufficient funds, this is considered a bad check.  NSF checks can be costly for a business as banks will commonly charge fees for you attempting to cash a bad check.

Luckily, businesses have a way to fight back after a customer has written a bad check to them.  Hiring a collection agency to collect the money owed is one solution to help them get paid in full.

Below we will cover some common questions that businesses ask after they have received a bad check.

How do I collect NSF checks?

Once you confirm the check has insufficient funds, you should contact the customer immediately.  Often times, the customer phone number will be on the check and that is the best starting point.  Call the customer and notify them the check bounced.  Be kind but to the point, ask how they plan on paying the money owed.  Attempt to arrange a payment method over the phone during the first phone call.

If the customer cannot pay on the first phone call, the business should send an invoice for the amount owed.  Add any fee’s such as late fee’s and NSF fees to help cover the fee’s the banks may of charged plus any applicable interest if those terms are included on the original invoice.

How much can a business charge for a bounced check?

A business can charge anywhere from $25-$50 for a bad check.  In addition to a fee for the bad check, businesses can add late fee’s and interest.  These fees will help encourage customers to pay on time in the future to avoid the extra fee’s.

What does a business do if a check bounces?

If a business received a bad check, they should contact the customer to notify them of the issue.  If the customer is not responsive or refuses to pay, they should send debt collection letters and attempt to collect the money owed.  If the customer still does not pay, the last resort should be hiring a collection agency.

How much can a business charge for a bounced check?

The average returned check fee ranges from $10 to $50, while overdraft fees are typically around $35. This fee helps cover the cost of any bank charges for the back check and the time involved in collecting the money owed.

How long does it take for a business check to bounce?

The most common timeframe for a business check to bounce is within the first week but it can take several weeks before it returns.  A company should be mindful of this risk and make sure to wait before spending the money if they have concerns the check could bounce.

How Do You Recover Money From a Bounced Check?

Most businesses can recover the money owed from a bounced check by simply calling the customer.  The customer can then pay the amount of the phone or come into the business and pay via money order or cash.  These two payment types guarantee the money will be received by the business.

If the customer does not pay the amount immediately, the next step would be to hire a collection agency that can attempt to collect the money owed.

Can you get money from a bad check?

A business can get paid from a bad check.  Often times, the customer made a mistake by writing a check from an old check book or forgot to transfer funds over to the account they are writing from.  If the customer refuses to pay then you may have to charge late fee’s and NSF check fee and use a collection agency to recover the amount owed.

Should you hire a collection agency to collect NSF checks?

If customers are avoiding phone calls or flat out refuse to pay, then hiring a collection agency to collect the amount of the NSF checks is the prudent business move.

A collection agency will collect the bad checks on a contingency rate.  A contingency rate means the agency only gets paid after the payment is collected.  If the debt collection agency fails to collect on the bounced check, then the business owes nothing.

Most of the time businesses will decide to bring in a collection agency out of desperation with the understanding that something is better than nothing.  Even if the collection agency keeps a part of amount owed, the revenue is almost viewed as “bonus revenue” or “gravy” as they never expected to get paid.

By hiring a collection agency, businesses can focus on the day to day task that helps grow the business.  Often time collection agencies can recover the money owed while representing the business in a professional manner that will retain the customer for future purchases.

Keep Invoices Organized

Lastly, a small business should keep all invoices on record in an organized fashion.  Many businesses will accept a check for the amount due without providing an invoice to the customer.  For example, a construction company may repair a gutter for $400 and the customer will write a check on the spot for $400 without receiving an invoice.

If the check bounces, you have no proof of invoice.  A collection agency will need an invoice showing the amount owed and also hopefully the invoice describes what work or product was provided.

We hope these tips will help any businesses facing the task of collecting an NSF check.  If you would like to receive a risk free quote, click the form below and we will be glad to discuss how CollectionAgencyMatch can help you get paid in full.