Checks: No Kites, Bounces or Post Dates

Business isn’t child’s play, and there is never time for playing games with your checking account or paying vendors. The times may be bad, but there is no need to make them worse by writing checks that will bounce, will be refused by the bank due to postdating, or being “kited” (checks written ahead of having money in the bank, risking having them returned for insufficient funds).

You may believe that you can write a check with a post date—say a week from now—and get the check in the mail … you may also be thinking that it is okay for the money to not be in that account “just yet” because it “will be by the time the check gets there.” Well, the post office may be slow, but don’t count on it being that slow … and even if it were, you are risking your business reputation and credit standing on the chance that things will goes as you have planned.

Real World Impact

Just last year I did some work for a firm that is, well, let’s call them a “financial services firm.” They had credentials that are important to them and they were financially trained, and well-trained at that. I billed them for services rendered. The terms were due upon receipt. Several weeks wend by and the check finally arrived. The check was processed for deposit and taken to the bank. A few days later a notice arrived from the bank “The check deposited could not be processed due to postdating and funds were not available.” My account was charged a fee for the returned check. The bank subsequently reprocessed the check and it finally went through. As is my company’s policy on returned checks, the client was invoiced for the bank fees. Time goes by … and no response to the invoice is received: None. Eventually we reinvoiced for the fees. The response was essentially “It isn’t our fault if the post office delivered our payment to you before the check date. It isn’t our responsibility if the check bounced.”

If you bounce a check after knowingly postdating and mailing it AND you don’t have funds in your account to cover the check, you bet you are responsible for it bouncing! If you are a professional service firm (e.g., accounting, legal), then you are even more accountable because you are educated and trained at a higher level of business than the general public. Codes of conduct and ethics are part of your credentials! But above all else, it is the right thing to do and if you want to continue to do business with people, then you have to do business the right way. Not paying your bills on time and then bouncing the check you send is NOT doing business ethically. It is like the five-finger discount in retailing (otherwise known as shoplifting)! You have, by causing your check to bounce and not reimbursing the cost of those fees, shorted your vendor an amount equal to those fees … whether that is $25 or $50 or just $5. You have through your business conduct cost your vendor money—maybe it was unintentional to begin with, but by refusing to make good on the result of your actions, you have penalized your vendor and damaged the relationship. If you have done it after not honoring the payment terms (due upon receipt versus paying in 30 days or more), then you have compounded the results of your conduct. Don’t be surprised if your terms in the future are to be required to put a retainer in place or to pay cash on delivery … and to not have discounts available, etc. Only the best customers, those who deal honestly with vendors, get the favorable terms.

Petty Practices Equals Big Consequences

You may not realize how your little ways of saving money may have big consequences on your reputation. You may think you are saving money, managing your cash flow and being business savvy. What you are doing is chipping away at your business and professional reputation and ultimately putting your ability to do business with businesses you need and perhaps at all at risk. If you get put on advance payment and cash only terms with enough vendors, you may soon fine that you don’t have an ability to manage your cash flow at all because there is no flexibility in terms. Oh, and those experts you need to ask the questions to, the people who can refer clients to your businesses, they don’t do business with you and they don’t make the referrals. So how savvy were you in not paying for that bounced check fee?

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