Clearing Time

Small businesses, other than retail, are mostly paid by check. Here are some ideas to help the check clear quicker.

First, when possible, ask your client or customer if they can pay by ACH or Wire. ACH stands for Automated Clearing House and is an electronic method of moving money among banks in the country. It usually takes up to three (3) business days for the money to be in your account. It is a cheaper method than a Wire, which is immediate and normally arrives in your account within two (2) business hours. Chances are the client will decline, citing cost or administrative burden, or both. But, it is definitely worth the ask.

When the electronic methods are not viable for your transaction, the traditional check in the mail will be your mode of payment and receipt. The first aspect of handling business checks is to confirm what state the company is in that has written you the check. Local, same state checks wil clear quicker. States, other than your own, will likely add at least another day for clearing time. And, another country, such as Canada, will have to go through Bank Collections, and can take up to three (3) weeks, even if written in US dollars.

Assuming the majority of your checks are clearing through US Banks, the key to expediting this clearing is really your individual depository bank. Smaller community banks and/or credit unions will often clear checks in one (1) day, and that may likely include higher dollar checks as well. At a minimum, they will allow a certain percentage of the check be available next day.

This is not always the case with larger banks. Small businesses have higher risk profiles for overdrafting and, as such, larger banks may often take up to three (3) to five (5) days to clear a check, even if it is a local check. Every bank’s policy is different and, at times, may be negotiable. So, if you prefer to bank with a larger, more National or International bank, as a small business, make sure you inquire about check clearing time. If it is not to your satisfaction, tell them what you require, and if they cannot accommodate you, consider a dialogue with a smaller, community bank.

Banks are relationship oriented. Often, the more business you have with them, the more they will value your relationship and the more incentives or rewards will be applied. And, as a small business, they will normally wrap in, or include, your personal business. Since the largest banking product most true small business owners will have will be their personal mortgage, start with the bank that holds the mortgage on your house. They should have the ability to include that amount in how they evaluate the total amount and/or its profitability in your relationship review.

Remember, banking is a relationship business. The longer and the more extensive the relationship, the better off you will be to negotiate terms that suit your needs. Do not just settle for a week long clearing time. This is how you make a living, quicker clearing is a must and dialogue with several banks before you choose which is best for your business.

Be like our dogs featured in today’s blog photo, Lâffey & Trévi, set your own path for a clear journey among the daily obstacles. Understand your options and choose the quickest means to your destination. And, clearing time for your check payments, should be priority number one.

Be well.