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Should the Bookkeeper Pay the Check

A Look At Operations...
When a check arrives in the bookkeeping department for payment against your customer's account, it usually posts against the account through the computer. Sometimes it is filed by computer, and at statement time it is sorted by computer, stuffed into an envelope, sealed, weighed, postage affixed, sorted by zip code-all done by automated systems. A bookkeeper never even sees the check...unless there is something wrong and the check has been rejected by the system, or if the account is on referral. The account may be flagged for some reason-for special handling, stop payment order, overdrawn, stolen checks, or a hold of some type. If flagged, the checks in for payment must be pulled and examined and the decision to pay or not pay has to be made. The decision has to be made immediately so that the check can be returned in a timely manner.

What do you look for if you are making a decision to pay or return referred or rejected checks?Real Check?-First of all, take a good look at the check. Is it an actual check, drawn on one of your open accounts? Is the transit number correct? Is the account number correct? Does it match the name of the account holder on your file? Is it possible it could be a laser or a photocopy of a genuine check?Signature-Next take a look at the signature. Is the signature that of a signer on the account? Is it genuine? Is this a special handling account where two signatures are required?

Look for signs of forgery. Are there pen lifts? Ink blots? Is the length of the signature consistent with the length of signatures on other checks in file? Are there signs of criminal tremor? And (don't laugh!), is the name misspelled?! It happens all the time!

Alteration-Has the check been altered? Has a payee been added? Was the check written in such a way that numbers could be added? Are there signs of erasure, or bleach or some chemical used on the surface? Years ago, before changes in processing some types of checks, hair spray could be used to erase amounts. The hair spray left the surface of the check slippery-and smelly!

Unless an alteration is caused by customer negligence (for instance, writing the check in pencil; leaving large spaces between numbers), alterations are usually the responsibility of the paying bank. That's YOU! Contact your customer if you suspect a large alteration.

Date-Is the check properly dated? A post dated check for a large amount can overdraw an account. Perhaps the customer didn't plan on making the deposit until just before the date on the check. This is a "no-brainer"... always return a post dated check.

A stale dated check is usually one over six months old. It's safest to refuse it.

Sometimes you may have a special agreement with your customer whose checks read "Not good after ____ days" and all checks are on referral for date. Normally a customer is service-charged extra for special handling for this extra work.

Endorsement-Has the check been properly endorsed? The account may be on referral for endorsements. (Insurance companies often do this-in order to be sure the proper people are paid.) You'll want to be sure it is endorsed EXACTLY as it is drawn.

Stop Payment-Is there a stop payment on the check? All stops should be reviewed and signed by the customer. This guarantees that the amount, the date, the payee, the check number, are all correct on the stop payment. Common sense rules in these decisions. For instance, if only the check number is different, it may be a replacement check and should be paid. But if the amount is different by pennies, perhaps it should be returned. If there is any question, try to contact your customer.

When you return a check for stop payment, be sure and punch a hole through one of the transit or account numbers so that if it is re-presented, it will reject. Why punch a hole? Well, usually, once you stop a check, the stop drops off the system. If the same check is redeposited and comes in again, it will simply go through and be paid...unless you have punched a hole in it. Then it will reject. Even if you have a system that doesn't drop a stop on return, the stop will automatically drop after six months. The check, although stale dated by that time, can still slide through our automated systems... unless you have punched a hole in it. Punch it!

Hold-Has a hold been placed on the account? For what reason? Could be a court order, or a teller who has cashed a check or put a hold on a deposit, or an IRS levy, or other reason. Your screen or printout should tell you who placed the hold and why.

Good Balance?-Is there a sufficient, available balance to cover the check? Do you pay against uncollected funds? Is there an transfer account to cover the overdraft? Should you pay the check and overdraw the account?

In many cases, when a check overdraws the account the first time, the bookkeeper will check with the officer who handles that account to see if the check should be paid and overdraw the account. Usually, if the decision is not to pay it, each time thereafter the account is overdrawn, the checks are automatically bounced. If, on the other hand, the decision is to pay the first time and overdraw, each time the account is overdrawn, the bookkeeper will have to call for a decision.

Copyright © 1994 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 5, No. 4, 12/94

First published on 12/01/1994

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