Recovering Bad Checks and Protecting Your Business

1. Contact the Issuing Bank Promptly

When a check bounces, reach out to the bank to verify whether the account has sufficient funds or if the account was closed. Early contact can often resolve the issue before more formal steps are needed.

2. Communicate Professionally with the Check Writer

A polite phone call, email, or written notice can encourage repayment. In many cases, bounced checks are unintentional, and reaching out directly helps recover funds while maintaining customer relationships.

3. Send a Certified Demand Letter

If initial contact fails, a certified letter clearly stating the amount owed, transaction details, and a deadline provides documentation. This record is essential if legal action becomes necessary.

4. Call Your Local District Attorney’s Office

Many local District Attorneys have a bad check restitution program to help recover funds. While the D.A. rarely investigates or prosecutes these checks directly, they contract collection agencies that can send letters on official letterhead. Often, the perceived threat of legal action from a state office encourages payment. This varies by jurisdiction, but participation in such a program can increase the chances of collecting owed funds.

5. Utilize Collection Agencies or Legal Action

If the check amount is substantial and previous attempts fail, a collection agency or small claims court can be used. Agencies typically charge a percentage of the collected funds, but they can increase recovery efficiency and reduce the time spent on collections.

6. Implement Preventative Policies

Reduce future risk by requiring valid ID, verifying accounts when possible, and setting clear rules for acceptable check types. Staff should be trained to identify suspicious behavior and check anomalies, helping prevent bounced checks before they occur.

7. Maintain Detailed Records

Keep organized records of all checks, bounced payments, and collection attempts. A strong record-keeping system simplifies dispute resolution, supports recovery efforts, and aids in compliance reporting.

Final Thoughts

Recovering from bad checks requires prompt action, clear communication, and escalation when necessary. Programs like District Attorney restitution letters, collection agencies, and legal action can increase recovery success. By combining recovery strategies with preventative policies, businesses can protect cash flow, reduce losses, and maintain smooth operations.