The Importance of an Accurate Check
If you are in business long enough, you will likely have at least one deposited check returned. Many people associate returned checks with lack of funds, but many times this is not the case.
It is important to keep an eye on the details when either writing a check or depositing one. There are many details that may go unreviewed in the excitement of receiving income or in the frustration of paying expenses. In the past year, we may have seen all that could go wrong and none of these situations involved lack of funds.
First, when making out a check, focus on the Payee, the business or individual you are giving the check to, likely in exchange for some type of product or service. It is imperative that you spell the name correctly. This is important when the name sounds like or is similar to a common word or expression. It is very easy to misstate a name, invert a letter or letters, or simply compose a completely inaccurate word. It sounds intuitive but you may be surprised how easily the Payee section is incorrect. This can cause the depositing bank to reject the check for obvious reasons - the name does not match the name on the bank account.
Second, is the date on the check correct? This can be a common mistake as the year turns into a new one. Most banks have a timeframe within when the check is considered “valid”. Often, that timeframe is around six (6) months. We are often so used to typing or writing last year, that we inadvertently continue that year into a new one. This can be very problematic and often not caught until a check is reviewed a few days after you deposit it. Our experience has been that the Bank will contact you, return the check, but not charge you a returned check fee. But, remember, if you have assumed those funds were available and written checks against it, that may be an unnecessary financial burden you have to immediately address.
The next aspect to review before you deposit a check is the written amount. I was once told by a Banker that it did not matter what was written in the dollar amount section. The focus of electronic readers is the written amount. So, make sure it is legible, make sure it equals the dollar amount, and do not forget to include the cents. An illegible written amount can cause the check to be unreadable and returned. Many businesses use electronically prepared checks which avoids this issue all together but many small businesses or individuals still write out their checks by hand.
And, lastly, perhaps the single most important element to confirm when writing or receiving a check is that it is signed. An unsigned check will eventually be returned. We recently were made aware of a situation where the client forgot to sign the check, the depositor did not notice that it was unsigned, and deposited the check in a drive thru lane. The Bank Employee also did not notice it was unsigned. Two (2) days later, the check was returned, the Banker contacted the depositor, and chaos ensued. The depositor had paid a few expenses with their debit card and the bank had initially cleared a small percentage of the check. The depositor had to pick up the check from their local bank, drive it to the client for signature and redeposit it back into the Bank. The Bank, recognizing its fault in allowing the check to be deposited by their Employee did not return the debit card amounts and did not charge an unavailable funds fee. Crisis averted.
All of these situations are real life examples that occurred recently to us or companies we know. So, be aware of them for your business or when writing a check to a business. It takes only a few minutes to confirm the date, the Payee, the written amount, and that the check is indeed signed by an authorized signer on the account. So, Check Please, in this situation means you need to “check” for accuracy when issuing or being issued a paper check.
In the canine world, a dog will often “check in” with its handler/owner during any type of work to ensure they are still working correctly. Follow our dog’s lead and apply it to taking those extra few moments to ensure you have the correct elements on your check. It will be well worth the additional minutes.
Be well.
