Returned checks have been a domestic problem ever since checks were introduced in the U.S. by Boston businessmen circa 1681. Solutions vary, including pitches for “free online check verification” or “how to verify funds on a check before it bounces.” The bottom line, however, is that free check verification is as much of a myth as the proverbial free lunch or snake-oil elixirs.
The cure, of course, is to contract a check verification and guarantee service provider.
Acknowledging this fact, there are four general types of merchants who have or need check processing services:
- Merchants with check verification or guarantee.
- Merchants who don’t have check processing services.
- Merchants who want to accept check payments.
- Merchants with a returned check problem.
Each of their stories is compelling, and each category has valid reasons for functioning with or without check processing services. The variables and outcomes are explored here.
1. Merchants with check verification or guarantee.
These merchants believe it is in their best interest to secure protection against all types of business perils, and they may even invest in extended warranties for some purchases. One can never be too sure, or so it is said, and that is why they invest in check processing services.
They could operate businesses where consumers regularly pay by check — either a high volume of relatively inexpensive transactions (e.g. dry cleaners, gas stations or grocery stores) or a lower volume of high-ticket items (e.g. auto dealerships, home furnishings dealers or building supply centers).
Whether they are satisfied with the level of service offered by their current check processing company or not, they have faith in the system because it creates a positive cash flow. The reason is simple: effective check guarantee helps merchants increase sales and mitigate risk while saving time and money. At some point, the dissatisfied merchants will seek the services of another vendor.
2. Merchants who don’t have check processing services.
These merchants accept checks, but have decided to make the calculated risk of not securing check processing services. They don’t accept a lot of bad checks, but they invest too much time collecting on returned items. This is informally known as “DIY debt collections.”
For example, the president of one company said his solution to collecting on bad checks was for him and his office manager to spend one hour each day phoning bad check writers with the hope of recovering funds. This is no way to start the day and certainly, no way to run a business. But this is the reality for some merchants.
3. Merchants who want to accept check payments.
First, they could be merchants who realize that not accepting checks is turning away good business from consumers who actually write good ones. These merchants have peers who run successful businesses partly because their checks are guaranteed by a vendor.
These merchants may also be aware that additional sales are being lost from referrals because the good check writers are not recommending the companies to their family or friends.
They could also be merchants who have read one of the recent reports stating that checks continue to be popular forms of payment for many businesses and consumers. Here are just a few of the studies:
- The Federal Reserve Payments Study: 2018 Annual Supplement— “Large-institution check payments increased 7.5 percent by value from 2016 to 2017.”
- October 2018 webinar by PYMNTS.com — “Sixty-four percent of B2B payments are still made with checks.”
- The 2017 Diary of Consumer Payment Choices report by the Federal Reserve Bank of Atlanta (September 2018) — “Consumers tend to use cash and cards for lower-value transactions, and electronic payments and checks for higher-value transactions.”
- The Q3 2016 SMB Technology Adoption Index (the most recent version) — “Ninety-seven percent of small and medium-sized businesses (SMBs) responding to the survey still rely on paper checks to make and accept B2B payments.”
Finally, they may fall into the category of merchants who accepted checks at one time, but stopped because they had a bad check problem.
4. Merchants with a returned check problem.
These merchants accept checks, but that includes a lot of bad ones, or at the very least, a smaller number of checks for big-ticket items. Consider the home furnishings dealer who sells a $5,000 living room set, only to have the check returned for insufficient funds (NSF), a closed account, stop payment orders, or a variety of check fraud schemes.
For these merchants, the returned check problem is eating away at the bottom line and causing a lot of stress.
Solutions from CrossCheck
CrossCheck is the largest privately held check guarantee company in the nation. On one hand it is the exclusive check guarantee provider for the largest auto dealership in the country, but on the other, it can fulfill the check processing needs of mom-and-pop establishments.
CrossCheck even guarantees checks declined by other check processing companies. Merchants doing business with the competition call CrossCheck for an approval code after their primary check guarantee vendor declines a check (this service is called Plus Sales).
Finally, CrossCheck offers a suite of guaranteed payment solutions for nearly all business types. Services can be individualized to satisfy specific needs.
Download our free guide about Check Guarantee services to learn why we call it “check processing made simple.”