Since its inception, the check has given rise to a first, 15th and 30th day of the month mentality and economy. As business checks are deposited, teller lines grow longer and crowds in commercial loan departments may swell. In turn, the cash from business checks may serve as security deposits on office space or payment for much-needed supplies.
But before the money can be put to good use, the check must be reviewed, endorsed and deposited, exchanged for cash or offered to a creditor as payment for a debt.
Elements of a Business Check
The printed information on a check, in addition to what a bank account holder supplies, instructs the bank how to handle the cash transaction that a business check represents.
The account holder's information, including name, address and contact number, appears in the upper left of the check. This information, in combination with the account number that's printed at the bottom right of the check, informs the bank of the account from which money should be withdrawn.
The person or entity who can receive the cash is documented in the check's payee line. That person, or an entity's designated representative, will endorse the check on the reverse side of the document. The endorsement confirms the person's right to receive the funds.
The dollars-and-cents value of the draft, which is stated in the check's "dollar box," instructs the financial institution to make payment to the payee in that amount. This figure is confirmed by the amount stated in script in the check's "dollar" line.
The account holder also enters a date, which serves as the check's timestamp and a signature line that confirms the account holder's intent to pay the recipient the documented amount. Lastly, the American Bankers Association (ABA) routing number is the number of the payer's financial institution. It alerts other institutions of the location of the payer's bank account and cash.
Endorse Business Check
The payee of a business check endorses it by signing the back of the check on the line that's designated by an "X," or the phrase "Endorse here." As payee, your signature should be the same as the name that's stated in the payee line of the check.
The back of the check might also include the phrase "Do not endorse below this line" because that area is reserved for check processing data.
Forms of Business Check Endorsement
A bank teller will answer any questions you have about how to endorse business checks, but the following guidance should be of help:
The Blank Check Endorsement
A blank endorsement requires the payee's signature, but no further information is required. You use this endorsement as a sole proprietor when your self-employed independent contractor's name is your legal name.
If the check's payee is the name by which your business operates (DBA) or a separate entity that owns the business, you, as an authorized signatory of the bank account, must endorse the check. In this case, you write the name of the business as it appears on the payee line of the check and sign your name below it.
The Restrictive Check Endorsement
The restrictive endorsement has two elements: your signature and the phrase "for deposit only" with the appropriate account number. The effect of this endorsement is the deposit of the business check into the designated bank account.
When choosing the restrictive check endorsement, and the check's payee is the name by which a business operates (DBA) or a separate entity that owns the business, you, as an authorized person, must endorse the check. In this case, you write the name of the business as it appears on the payee line of the check. Next, you sign your name. On the next line, write your official title, such as CFO. Finally, enter the restriction "For deposit only" and the account number.
The Endorsement in Full
The endorsement in full effectively creates a third-party check that, upon your endorsement of the business check as an authorized person, can be cashed or deposited by someone else to an account they own.
When choosing the endorsement in full and the check's payee is the name by which a business operates (DBA) or a separate entity that owns the business, an authorized person must endorse the check. In this case, as an authorized signatory of the bank account, you write the name of the business as it appears on the payee line of the check. Next, you sign your name. On the next line, write your official title, such as CFO. Finally, enter the restriction, "Pay to the order of" with the recipient's name.