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Are Business Checks Potentially Useful to Your Company

Sep 04, 2018

Even seemingly small and mundane details and decisions can impact a company’s success. One of those matters involves whether the company should pay with business checks.

Yes, presenting a business credit or debit card and electronic payments bring convenience and represents a “green” approach to business. Paperless transactions can ultimately reduce the amount of trees sacrificed for the sake of paper. With a few keystrokes, “money” changes hands and bills and invoices get paid instantly. Confirmation of payments come via an email or text.

However, business owners need to consider more than the convenience of and image associated with embracing electronic or paperless payments. Companies face attack from computer hackers, viruses and other interruptions. The Internal Revenue Service, state and local income tax agencies and auditors demand proof of expenses legitimately incurred, paid and reported. To judge profitability, management wants to see the cost of the goods sold or services rendered. Paper aids the ability of accountants and others to maintain internal controls that can thwart fraud or waste in the company.

Business checks afford companies the ability to create the needed paper trails for accountants and auditors and to protect the enterprise from various methods of fraud.

The Top Five Questions

1. What Information is Placed on a Business Check?

Business checks allow companies to furnish information in a way not possible with electronic payments, especially to track performance and pass audits. On the memo line, the company can reference an invoice number or otherwise identify the transactions. The invoice or bill being paid can include a check number. When it’s time to prepare the income statement, the bookkeeper or accountant can connect an expense with either a cost of good sold or other category. The auditor will also see that the cost was incurred and satisfied.

2. Why Are Business Checks Larger than Personal Checks?

The larger size of business checks provides enough space the information that companies need to adequately record transactions. In a corner or other opening, the company can display a small version of its logo. Ledgers can accommodate business checks more readily than personal ones, allowing more convenience for accounting. The bookkeeper or accountant can write the check amount and payee next to the check before tearing it out, adding to the ability to prepare for audits and earnings reports.

3. Why Not Just Use Personal Checks?

Having business checks means the company has a business checking account. Commingling business money with personal or household funds generates confusion as to whether funds should fall as business or personal. For those, such as lawyers, who hold money for others, mixing business and personal funds is prohibited. Additionally, fewer vendors do accept personal checks out of fear that the account lacks enough funds to cover them.

4. What Security Measures Come With Business Checks?

Features such as watermarks, holograms, ink that is sensitive to heat and fluorescent fibers afford businesses defenses to fraud artists. Check fraud can take the form of counterfeit checks and altering the amounts or payee. Thanks to the laser printing and type of paper, business checks often turn different colors when people attempt to wash the checks to change the amounts. Some printing services employ unique paper not available from stores or other readily accessible sources.

5. What Disadvantages Come With Business Credit Cards?

Interest represents the cost of paying invoices and other expenses on credit when the business has a sparse amount of cash. While credit cards allow for a single, centralized payment and interest is a deductible expense, companies using them may encounter difficulty allocating the interest as a cost of goods sold. With credit cards, the actual expense might not be paid until the following month. Using business checks solves the problem in that the payment becomes an expense as soon as the business pays for the item rather than when the credit card statement comes.

Business checks aid companies in satisfying their obligations to auditors, tax authorities and others. Practical and aesthetic benefits come to businesses that may resist the urge to avoid paper for fear of appearing behind the environmental and technological curve.