Issuing a business check is a formal, auditable financial transaction that requires precision. Maintaining accuracy when writing checks is paramount for legal compliance and ensuring a clear, traceable record of all business expenditures. This paper trail is fundamental for financial auditing, accurate tax preparation, and managing the company’s cash flow. Establishing a meticulous process for check writing ensures the integrity of your financial data from the moment a payment is authorized.
Understanding the Components of a Business Check
A business check contains several pre-printed areas that facilitate payment. The check number is a sequential identifier located in the upper right corner and repeated on the bottom line for tracking and accounting purposes. The business name and address are typically in the upper left, while the date line is positioned near the top right.
The recipient’s name is written on the “Pay to the Order of” line, known as the payee line. The dollar box is a small, clearly marked area where the amount is entered numerically. Below the payee line, the written amount line is where the dollar value is spelled out in words to remove ambiguity. The bottom of the check contains the MICR (Magnetic Ink Character Recognition) line, which includes the bank’s nine-digit routing number and the business account number, followed by the check number.
Step-by-Step Instructions for Writing the Check
The first step in issuing a check is to write the date in the designated line, typically using the current date, though a future date can be used to post-date the payment. Immediately following this, the full legal name of the person or entity receiving the funds must be written on the “Pay to the Order of” line. Correct spelling of the payee’s name is important to avoid issues with cashing or depositing the check.
Next, the payment amount is entered in the small dollar box on the right side of the check, using clear, legible numerals and including the decimal point for cents. This numerical amount is then translated into words on the line below the payee. Writing the amount out in words governs the payment, acting as the legal amount if there is a discrepancy with the numerical entry.
For example, a payment of $147.89 would be written as “One hundred forty-seven and 89/100” dollars. The check is validated only when an authorized account holder signs their name on the signature line. All entries should be made using permanent, non-erasable ink, preferably dark blue or black, to prevent fraudulent alteration.
Essential Best Practices for Business Checks
To safeguard against fraud and ensure clear transaction tracking, certain best practices should be observed when issuing business checks. After writing the written amount, draw a line to fill any remaining space on the line to prevent unauthorized additions to the dollar amount. Apply the same principle to the numerical dollar box: begin the number close to the dollar sign and fill any remaining space with a dash or line.
The memo line, while optional, should be utilized to provide a detailed reference for the payment, such as an invoice number or a brief description of the expense. This detail is invaluable for both the business’s internal record-keeping and the payee’s accounting. If the business bank account requires it, a second authorized signature must be obtained to validate the check, which is a common control for managing larger dollar amounts.
Maintaining Proper Business Check Records
The process of issuing a check is incomplete until the transaction is immediately logged in the check register or accounting software. This mandatory step involves recording five specific details to maintain an accurate financial record. These details are the check number, the date the check was written, the payee’s name, the exact amount, and the purpose of the payment.
The check register serves as a component of the company’s financial records, helping to track the running balance of the business account. Promptly recording every check allows for efficient and accurate bank reconciliation, which matches the check register entries with the bank statement. This habit is necessary for understanding the business’s financial health and ensuring compliance with tax and audit requirements.
How to Correctly Void a Check
If a mistake is made while writing a check, or if a blank check is needed only to provide banking information, it must be correctly voided to prevent fraudulent use. The procedure involves using a pen with permanent ink to write the word “VOID” in large, clear capital letters across the face of the check. Write “VOID” across the date line, payee line, amount box, and signature line to ensure the word covers a significant portion of the document.
Avoid obscuring the routing and account numbers printed on the bottom of the check, as these details are often needed for setting up direct deposit. Once the check is marked, the corresponding check number must be recorded in the check register with a note indicating it was voided. This log entry ensures the sequential integrity of the check numbers in the business’s accounting records.