Cashing a check looks simple and easy since most people, especially those in the business industry, do it on a daily basis. However, there are a number of banks, financial institutions, and check cashing businesses that do not easily cash a check without closer scrutiny. These institutions are very careful when it comes to cashing a check in order to avoid liability. For example, if a particular check is fraudulent, the cashing entity can be held liable thereof. If you don’t know how to cash a business check, this article can help you.
A business check is a bank draft written against a checking account. It is then negotiated on the business deposits, not on the accounts of the business owners, making a clear demarcation between personal assets and business assets. The main reason of delineating a personal account from a business account is to ensure that all business finances are properly managed and correctly accounted for.
To know more about cashing a business check, read the guidelines below.Verify the check’s watermarks. Often, banks look for watermarks to prove the legitimacy of the check. It is a common practice among banks to print watermarks on the checks they issue. Therefore, if your check has no watermarks, the teller of the cashing-bank may call your bank to verify it is not using watermarks when issuing checks. The teller may likewise confirm from the issuing bank whether your check is legitimate.
Verify if the check is properly endorsed. This goes to saying that the check must be correctly endorsed by the company’s authorized agent before it can be cashed. It is a normal banking procedure that when a person or entity sets up a checking account, the names of individuals authorized to make withdrawals and deposits in the account must be clearly indicated.
Thus, before a check can be cashed, the bank will verify if the signature matches with that of the people authorized to transact in the account. Often, the bank will ask for photo identification cards. For endorsement purposes, the use of a stamp is allowed. Just make sure that such a stamp has been duly noted, certified, or approved by the bank.
Verify the account number. While other details may be handwritten, the account number must be pre-printed on the face of the check. Tellers neither accept nor honor checks that bear a handwritten account number. Therefore, this should serve as a notice to you not to accept a check from a customer once the account number isn’t pre-printed.
Sign a hold-harmless conformity. Business owners are encouraged to deposit business checks to their designated business accounts, and thereafter withdraw the amount of money. Often, business proprietors are unable to cash business checks directly; they have to wait until their checks are cleared. However, if you need to cash your check as soon as possible, sign a hold-harmless conformity with the bank. The agreement simply means that in case the subject check bounces or an unauthorized individual cashes it, you will not hold the bank responsible whatsoever.
Deposit the check to your personal account. This is possible, but not recommended. Business owners are not supposed to mix business checks into their personal money, or else there will be confusion in auditing later on. Depositing the amount to your personal account will necessarily alarm the IRS that you are hiding some business funds.
Deposit the check to a separate business account. This is the most appropriate way to cash a check, thus highly recommended. Doing so will not send any red flags to the IRS that you doing something illegal with your funds. Also, a business account has different service requisites and interest rates compared to a personal account.
If you are still unsure of how to cash a business check, the wisest and easiest mode is to deposit your check into your business account. Paying out your business bills through checks that are addressed to the correct payee is an essential business practice that discourages frauds. This also proves that business owners are not concealing funds. Proper management of business funds as well as personal money is, therefore, encouraged in order to avoid legal penalties by the IRS.