Guaranteed Funds Save You Headaches

by Vin Ayden, Sr. Risk Manager

At Checkitco.com, our Credit Risk Assessment report helps you determine a customer's potential credit worthiness. How you elect to be paid is directly correlated to the risk score. Customers who score poorly may earn the suggestion "request cash in advance with guaranteed funds".

But what does this mean?  What are "guaranteed funds" and why is this a suggested payment method?  

Cash in advance simply assures you receive payment for a job before you spend a dime to produce it.  This prevents your raw materials and labor from being wasted on a customer who can't pay, and assures that materials and time are not diverted from paying customers.

Guaranteed funds means the customer pays with a cashier's check from their bank.  The bank accesses the customer's balance, immediately transfers the amount in cash to the bank's general account, and writes a check from the bank's general fund for the amount owed.  The check is guaranteed to clear because the money is coming from the bank's account, not your customer's account, and banks generally do not bounce checks.    

A word of warning: Postal money orders are technically "guaranteed funds", but are also the most commonly forged monetary instrument out there, so be wary of anyone volunteering to pay with or offering postal money orders.  Consider a policy prohibiting payment with postal money orders.  This protects you against postal money order fraud. Postal money orders are a huge red flag that someone operating outside the typical banking world, which usually spells trouble.  Suggest that the customer visit their bank to request a cashier's check.  Legitimate customers have a bank that can prepare a cashier's check with guaranteed funds. Don't take wooden nickels or postal money orders.  

Click here to order a Credit Risk Assessment