Security Checks for Accepting Checks?

Even though the trend in the payment and processing industry is toward automation and electronic transfer, it is still pretty common to receive a physical check as a form of payment from customers.  Despite its commonality, there is risk associated with accepting checks.  According to a survey performed by the Association for Financial Professionals, in 2014 62% of the companies surveyed were a target of payment fraud, of which 77% were fraudulent checks.  Although a study performed by the same group in 2015 shows that nearly 80% of businesses were moving from paper checks to automation, there are still companies out there that manually cut checks.  How do we effectively manage the risk associated with these businesses?

Go with Who You Know

Obviously you are less at risk for check fraud when you accept payment from established, trusted customers.   However, if you have a good working relationship with such customers, you should consider requesting method of payment change.  Many businesses have the capability of wiring money or paying via credit card but simply have become complacent with writing checks, but in reality don’t have a preference one way or another.   It never hurts to ask.

Keeping New Customers Honest

There is a higher risk of receiving bad checks from new customers than from established customers.  When obtaining a new customer, be sure to do your homework.  Research the company online to see if there is any bad press.  For local businesses, ask other local business owners in town to see if they have experienced or heard of any problems with the company.  Word of mouth is a powerful tool.   Should you choose to accept a new customer, check verification is critical in mitigating the risk of fraudulent checks.  Two steps should be completed before accepting new payments.

  • Account verification:   You want to know that there is a valid account associated with the payment.
  • Identification Valication: Make sure your customers are really who they say they are.

Durango Merchant Services provides services for payment risk analysis, identification, verification, and authentication to minimize payment risk.  If you are receiving new clients that choose to pay with checks, we can help you secure against possible losses and headaches.  Contact us if you need any help!