Are Check Guarantee Services Worth the Money?
Check guarantee services essentially provide insurance policies on potential bad checks that your customers write. If you receive a check that comes back with insufficient funds, the check guarantee service will reimburse you up to a specific amount. Some businesses — particularly those that receive a lot of checks — can benefit exponentially from check guarantee services, while others will be throwing their money down the proverbial toilet. So just like asking yourself ‘ do you need film errors & omissions insurance for your film’ , you also have to ask yourself if guarantee services worth your hard earned money.
First, you need to analyze how many bad checks your company has received in the past, and look at that number in proportion to the number of checks you receive on a whole. Many businesses are discovering that their clients are paying with credit and debit cards rather than checks, which means that your chances of receiving a bad check decrease considerably. Check guarantee services are only beneficial if you save money rather than lose it from the use of their services.
You should also look at the size of the checks that you receive. Unfortunately, most check guarantee services will only reimburse you for a bad check up to a certain amount, such as $1,000. Anything beyond that is simply lost unless you can collect it from the customer. If your business warrants the writing of large checks, a check guarantee service might not be beneficial for you at all.
Once you’ve determined your own needs, you can start to look at check guarantee services individually. Your best bet is to interview representatives from several different firms to get an idea for your options. For example, you may have to pay a higher monthly fee depending on the industry of your business. A used car dealership, for example, poses a larger risk to a check guarantee service than does a drug store.
The most important thing that you should look for in one of these services is a short contract term. You’ll want to reassess your need in three or four months to determine whether you’re losing money or saving money, so never sign a six-month or year-long contract with a check guarantee service. Furthermore, you should have your corporate attorney look over the contract to make sure that it is favorable for your business. Beyond that, here are a few things you should consider.
Payment Remission. How quickly will the check guarantee service remit payment for a bad check you receive? This can vary from five business days to more than five weeks, so make sure that the length of time is to your advantage. You should also ask what paperwork needs to be submitted in order for your company to be reimbursed.
References. A check guarantee service should be more than happy to give you contact information for current and past clients. Call them up and ask how their working relationship transpired and whether or not they are satisfied. The company is going to tout their services regardless of their track record, so make sure that their customers back up their claims.
Method of Collection. Once the check guarantee service remits payment to you, they will attempt to collect your debt. Make sure that they are in compliance with all collection laws and that they exhibit good customer service. If the company starts harassing your clients for payment, it reflects poorly on you and your business.
Legal Requirements. Make sure that the check guarantee service is properly bonded and licensed and has all of the proper paperwork to do business in the U.S.