Checks are indispensable to aspiring entrepreneurs and established businessmen alike. Suppliers and lessors usually require post-dated checks or PDC's to cover installment payments, and issuing checks are generally more convenient and safer than carrying huge amounts of cash. However, just like in any aspects of business, high vigilance is required. Check frauds are still prevalent. In many instances, the check you are holding, while valid, is worthless. Here are some reminders:

1. Guage the credibility of the issuer/maker. You cannot simply rely on the Bouncing Checks Law or BP 22, which now appears to be a toothless law (please refer to the update at Philippine e-Legal Forum). Follow your gut-feel and decide if the issuer/maker has more to lose when he runs from his obligation.

2. Include a secret mark/sign (like a harmless dot in a particular location) in all your checks. This may not be fool-proof, but it helps. Remeber that going to the PNP Crime Lab for authentication is a time-comsuming and costly process.

3. Always reconcile your record at the end of each month. Banks send statements; if they do not, ask them. Many fraudulent activities can be prevented or minimized by this simple bookkeeping.

 

. A check is different from Negotiable Orders of Withdrawal (NOW). They look the same, but a NOW document indicates that it is a NOW account. These are not checks and remember that BP 22 only covers checks.

5. Don't accept a second-endorsement check. Mr. A issues a check to pay Mr. B (payee), and Mr. B uses the same check to pay Mr. C. That is a second-endorsement check. It's so risky that banks, as a rule, do not accept these checks.

6. Be careful with crossed checks (with diagonal lines in one corner). It's good only for the one named as the payee and it can only be deposited by said payee with a bank where he has an account.

7. Again, always be vigilant. Simply because your check was falsified/forged does not mean that you're free from liability. If banks are able to show (and they usually do) that the accountholder was negligent, the accountholder may suffer a portion, if not all, of the loss.