Here's How You Can Protect Your Business

7 Things Contractors Can Do When a Client Bounces a Check Part 1

Getting paid is an ongoing issue that permeates every level of the construction industry. Sad, but true, receiving payment for work completed has a seemingly endless set of barriers. If you build a reputation for doing great work, are selective when acquiring clients, and build sound accounting processes, there will still be an occasional challenge. What’s profoundly frustrating is when you receive a check from a client and after depositing it, you receive that same check with a non-sufficient funds (NSF) stamp on the back. This NSF notification is accompanied by a fee from your bank. While you can always contact a Birmingham construction lawyer for problems with non-payment, we have created a two-part guide with steps for dealing with bounced checks.

Establish a Policy for Handling Bounced Checks

If you stay in business long enough, you will have to deal with a bounced check or two from clients. One of the best ways to both deal with bounced checks and discourage them is to create a policy addressing them. When a contract is presented, establish that a fee will be charged if a check is bounced.

Ask Bank to Notify You If A Check Doesn’t Clear

This simple act can reduce the shock of receiving a bounced check and better arm you for taking action. When starting a relationship with your bank, let them know that you’d like to be notified immediately if a check doesn’t initially clear. This will give you the opportunity to either run it again or contact the client to notify them of the situation. It should be noted that checks are sent through the clearing process twice before they are denied.

Electronic Check Re-presentment

While checks can only go through the clearing process twice, contractors can request that a check be “re-presented,” giving your client a third opportunity to provide the funds necessary to back the check. Not all banks offer it so It is important to ask about it when opening an account.

Notify the Customer

It’s important to notify the customer of the situation. It may be an oversight on their part and something that can be easily rectified. When approaching them, it’s important to take all emotion out of the situation. This is business and if you start to point fingers, you may be pushing yourself further away from receiving compensation.

For more tips, visit part 2 of this series.

If you would like to speak with one of our Birmingham construction lawyers, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.