The Perils of Paper Checks
The saying ‘my dog ate my homework’ can be a fabricated excuse or real life experience when you have a puppy that puts everything in its mouth. Paper can be chewed up, lost in the wind, ruined when liquid is inadvertently spilled upon it, or shredded by an exuberant canine and the list may keep going. Unfortunately, this applies to any paper, including business checks.
A few real life experiences among colleagues recently brought the focus back on the fleeting life of paper checks. Particularly among non-retail businesses, paper checks are the choice of most owners. They do not require any type of sophisticated electronic system or a service, normally fee based, at your financial institution. Often, many owners take pride in writing checks and receiving checks. Their physicality is what most of us are used to when it comes to making payments and receiving income. But, is it safe?
Paper checks sent in regular mail can be lost with no associated tracking. We waited for a check that literally came from down the street from our office for 3 weeks. The address was correct and we have no idea what adventure it went on and why it waited that long to be delivered. The wait was excruciating.
Overnighting a paper check provides an additional level of comfort over regular mail as there will always be a tracking mechanism. However, as we learned recently, overnight packages can be rained on or snowed on and adhesive on the side can become unglued and the check falls out of the overnight envelope. This scenario creates chaos as the receiver is left holding an empty package without benefit of receiving money owed to them and the sender has to scramble to stop payment on the check for a fee and either re-issue a check or wire funds to the recipient. Neither of these outcomes are efficient.
Mail fraud is another possibility when sending paper checks through the mail. We are aware of a few situations where checks have been intercepted en route and attempts to cash them have occurred. Often, but not always, these attempts to cash stolen checks are caught by the financial center where the stolen check is presented for payment. We all want to believe this will never happen to our business but it can and it does.
If paying by paper check, rather than by ACH or wire, is your preferred method of payment, take safe-guards to prevent any of the above scenarios. Use thick envelopes that are not see through, arrange to have the check picked up by the recipient if they are local, ensure the address is complete with the proper zip code, name of building and suite number, if applicable and, if using an overnight option, make sure to use only a well-known reputable company and inquire about insurance for the package.
One of the simplest efforts you can undertake when sending a paper check is to advise the recipient it is coming and ask for confirmation upon receipt. This will alert both parties to the fact that the check is in the mail and if it is not delivered either overnight or within 3 - 5 business days for regular mail, there likely is a problem. If you do not communicate to the recipient the check is en route, you risk it being cashed by someone else if it is not received in the normal timeframe. None of us want to face that scenario.
When you transact with paper checks know the risks and manage the process for success. And if there is a dog at your workplace, keep them out of the accounting area.
Be well.
