Check Payments by Fax

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A serious collection dilemma for the collections person is having a dilatory customer say it will mail the check – which then takes an unpardonable amount of time to arrive, indicating that the check was not mailed right away. If the collections person asks that a check be sent by overnight delivery service, then either the customer balks at the extra cost, or the company must pay the fee.

An alternative delivery method is check-by-fax. Under this approach, the customer faxes the completed and signed check to the collections person, who promptly enters information from the check into check printing software that is readily available from a number of companies. The company then prints the checks using approved check security paper, which is readily available from an office supply store. The check is created using standard printer ink, not magnetic ink character recognition (MICR) ink. The check will not have a signature line. In stead, it will contain a block of text where the signature line was, stating something similar to the following:

SIGNATURE NOT REQUIRED
Payee to hold you harmless for payment of this document
Absence of endorsement is guaranteed by payee’s bank.

The company then deposits the check with its bank. The bank may need to process the check manually, since it does not use MICR ink, but it should accept the check. The net result of this process is that the company has eliminated the mail float from the collection process.

Because the company must obtain the customer’s authorization, it is useful to retain a copy of the faxed check. A variation is to send the customer a check authorization form, which they fill out and return by fax, along with a voided check. The information used in this process can also be collected over the phone, but that approach is not recommended, since it is prone to error and also results in no documentary evidence from the customer.