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This Check Is To The Business, Deposit It Please
by John Burnett and Andy Zavoina, BOL Gurus
Guru BIOS
Question: What is a good explanation to give to a business customer as to why the bank won't cash a check made payable to his business, but wants it deposited instead?
Answer by John Burnett: Since there really isn't any "black letter law" on this question, I think the best explanation is that it is your bank's policy not to cash checks payable to businesses.
It's the banking equivalent to "Because I said so!"
Answer by Andy Zavoina: I do not have a cite but most accountants want a clear money trail of funds into and out of accounts for IRS reporting. To do otherwise may give the impression that they are under-reporting income. Also, the check is payable to the business and the bank would have a difficult time verifying who may cash checks payable to a business, as it is its own entity. So the reasons revert back to providing an audit trail and because the bank does it this way (and many, if not most, banks do).
First published on BankersOnline.com 6/20/05
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