A business check is written against a company’s checking account. Unlike other accounts, checking accounts don’t have an activity limit. You can deposit and withdraw money from your business checking account at any time without incurring additional costs. Business checks keep company operations going because they provide steady cash flow.
Cashing Business Checks
When you cash a business check, you’re expecting money from the drawer’s checking account. There are rules to cashing a business check. The first and most important rule is your bank must allow you to cash business checks.
Your bank may turn down a check if it’s for a large sum of money. The financial institution may have a limit as to how much it can give out in a day. If the business check surpasses this limit, the bank will refuse to cash it in.
Moreover, don’t hold a business check for more than six months. If you do so, the bank has every right to turn it down.
Cashing business checks also depends on the type of business. If you manage a sole proprietorship, you can cash business checks written in your name.
However, it is not uncommon for sole proprietors to receive business checks written in their business name. To cash in such checks, your bank must be aware of your business’s official name. When registering your business checking account, there’s a section that allows you to add your official business name. It’s called the DBA or ‘doing business as’ section. Add your official business name to this section. That way, the bank can authorize the cashing of checks in your name and the business name.
For limited liability companies and partnerships, the business check has to be addressed to the company’s registered name. If the names don’t match, you won’t be allowed to cash the check. Furthermore, since a partnership and a company may have multiple partners and shareholders, two or three people can be the designated signatories for the business checking account. As such, only the signatories are allowed to cash in company checks.
Cashing Business Checks without an Account
Imagine a scenario whereby you shut down a business due to cash flow problems. Since you’re not expecting cash, you also decide to close your business checking account. However, a few months later, a client that took goods on credit a long time ago decides to finally reimburse you. They write you a business check for a large sum of money. You cannot return the check because it’s your money. But you don’t have a business checking account, what do you do?
Large retail stores have money centers that allow you to cash checks worth less than $5,000. The store will charge you a percentage of the checking amount as processing fees. After verifying your personal and business information, they’ll give you cash and take the business check.
Alternatively, you can go to the drawer’s bank and request them to cash it. They will also require identification to verify your information before releasing the funds. You’ll be charged a fee for this transaction.
Types of Business Checks
Ordinarily, business checks are larger than personal ones for distinction purposes. The first variety of business checks are known as wallet checks. They are convenient to carry around and can be customized with your company name and logo for a fee.
The second type is called 3-per-page. Others may call them 3-to-a-page business checks. These checks have a business stub that allows the drawer to record information about purchases. These stubs are used as proof of payment that the check was issued on the recorded date.
The final type is computer or electronic business checks. You use accounting applications to draft and send multiple computer checks. Computer checks help to save on time. To cash the check, the recipient prints it and goes to the bank. The drawer must authorize their bank to accept the computer checks.
To conclude, that’s basically everything you need to know about business checks. If you’re thinking about starting a business, opening a business checking account should be on top of your list. These accounts facilitate speedy transactions.