Many businesses rely on cheque guarantee, cheque verification, and collection services to fight cheque fraud. But preventing acceptance of fraudulent cheques in the first place is the best policy. According to a recent Ernst & Young survey, 75 percent of merchants used a third-party verification service to pre-approve cheques, 16 percent used manual approval methods, and 13 percent used in-house authorization systems.

Here are some other steps to combat cheque fraud:

Establish a cheque acceptance policy. Be sure to follow it consistently. Your policy should define acceptable forms of identification, necessary information to accompany cheques, and £ limits for cheque writing. Be careful: Laws in several states prohibit cheque acceptance policies that require a credit card number on the cheque.

Get ID. Cashiers accepting cheques should be certain the customer name, address and phone number are imprinted on the cheque and that they match the information on the ID. Be sure the written and numerical amounts on the cheque correspond. If a bank agrees to process a cheque with differing amounts, the written amount overrides the numerical figure.

Confirm the customer's identification is current. More than 50 percent of forged cheques are cashed with an expired driver's license.

Record the cashier's ID number or initials on the cheque. This information will be needed if there's a prosecution.

Feel the cheque. Merchants should also consider the "feel" of the cheque since most cheque paper has the same weight and texture. The type style should also be consistent and aligned.

Check the numbers. Ninety percent of bad cheques are numbered below 500. But keep in mind that there's little to stop a customer from opening a chequeing account and starting cheques with a higher number.

Don't accept second- or third-party cheques.

Only about one percent of the 60 billion cheques written each year actually bounce. One-third of cheque fraud stems from closed accounts and "cheque kiting," according to the US based Nilson Report, a news service for the payment services industry. Another 27 percent is due to counterfeit cheques, 24 percent to forgery, and 12 percent to bankruptcy, and 5 percent of cheque fraud is attributed to other reasons.

Business owners in restaurants and hospitality businesses run a higher than average risk of cheque fraud. Merchants operating in industries where stolen goods -- such as electronics -- can easily be resold also run a higher risk of cheque fraud.

Collecting on bad cheques can be difficult if not impossible. Nationally, less than a third of cheques returned for insufficient funds are ever paid in full. But collection efforts are far more successful if the merchant acts quickly to seek payment.