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#538550 - 04/26/06 06:15 PM Cashing business checks??
skzith Offline
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Joined: Apr 2006
Posts: 1
Hello! I am a brand new teller at a very small bank. In training, I was told to NEVER cash checks made out to a business. However, the man that owns the bank has family members that own an incorporation, and I have been told that I MUST cash any checks made out to that particular business or I could lose my job. I asked our operations manager if this was illegal, and he told me that it was not. He said the only reason we say no to cashing business checks is because we don't know if all business owners have authorized the check cashing. He said that since we know we can trust these particular people, it is OK to cash their business checks. I don't know if I believe that. Am I assisting these people with tax evasion?? If so, what can I do to stop it?

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#538551 - 04/26/06 08:19 PM Re: Cashing business checks??
strongbad Offline
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strongbad
Joined: Oct 2005
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Arkansas
What I've been taught is to only cash a check written out to a business if they are a DBA (owner uses social for the TIN) If a non-DBA has a check to cash and they have an account with us we have them deposit the check into the business account and then do a withdrawal with their signature. This keeps non-account holders from cashing a check written to a business and it also provides a paper trail. Banks make exceptions based on how well they know the customer but they are doing it at their own risk.
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#538552 - 04/26/06 08:30 PM Re: Cashing business checks??
John Burnett Offline
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John Burnett
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Cape Cod
I hate situations when you have a rule and exceptions, especially when the exceptions are based on an inside relationship. It just puts people in a very unpleasant position, as skzith can attest.

That said, I recognize there are exceptions in almost every bank. I think you must clarify for yourself, skzith, what the rules are (including the exceptions), and then follow them. Your first duty is to your employer here, and you are not breaking any laws.

Cashing checks payable to businesses is one way to hide business income and avoid taxes. But that's not the only reason that some businesses like to do this. Some are simply trying to use shortcuts to turn checks into cash.

While I don't approve of your bank's apparent exception here, I don't recommend that you buck the system unless you've decided that you won't mind looking elsewhere for employment. That's not meant as a threat. It's just recognition of the facts of life.

And if the bank management or the business in question gets into dutch over this at some point, you can take satisfaction in the fact that you thought they would.
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#538553 - 05/09/06 10:50 PM Re: Cashing business checks??
SP Offline
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SP
Joined: Mar 2006
Posts: 63
I know this post is a little old, but are there any laws or regulations that prohibit banks from cashing business checks?
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#538554 - 05/10/06 11:12 AM Re: Cashing business checks??
rlcarey Offline
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Galveston, TX
No laws or regulation prohibit it.

It is all a risk reward issue - you have to consider whether you have the property authority to do so based on the person standing in front of you.
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#538555 - 05/18/06 05:19 PM Re: Cashing business checks??
Anonymous
Unregistered

We have always been told not to cash a business/corporate check that is made out to "Cash". Our audit dept. said that it violated some sort of IRS rule... Of course no one could ever tell us, Which Rule...
Is it ok (if management concurs) to cash a corporate check that is made out to cash?

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#538556 - 05/18/06 05:22 PM Re: Cashing business checks??
rlcarey Offline
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Galveston, TX
OK - sure. Many businesses do this for reasons such as to obtain petty cash.
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#538557 - 05/18/06 05:28 PM Re: Cashing business checks??
Anonymous
Unregistered

It's like one day finding out Hitler was you father..!

I have been told for years that cashing a corporate check made out to cash was illegal....
Where did this "wive-tale" come from?

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#538558 - 05/18/06 05:46 PM Re: Cashing business checks??
nemsi Offline
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Joined: Nov 2005
Posts: 383
If they are not allowed to cash checks payable to cash, how do they get operating cash?

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#538559 - 05/18/06 07:39 PM Re: Cashing business checks??
Anonymous
Unregistered

The ones that I have seen were made payable to the bank and drawn on the corporations account. Others have been made payable to the corporation and then endorsed by an authorised signer.

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#538560 - 05/18/06 08:13 PM Re: Cashing business checks??
nemsi Offline
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Joined: Nov 2005
Posts: 383
we do not cash checks payable to a corporation so that's not an option for our customers. i have been told that checks payable to the bank should be accepted only as payment to the bank- not for cash for customer's benefit. so our only option has been checks payable for "cash" endorsed by authorized signer. are we doing something that we should be rethinking.

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#538561 - 05/18/06 08:16 PM Re: Cashing business checks??
waldensouth Offline
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waldensouth
Joined: Nov 2001
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FINALLY ABOVE the gnat line
If our corporate customers need operating cash, they make their checks payable to cash - signed by an authorized signer. We then provide them with their cash.
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#538562 - 05/18/06 08:31 PM Re: Cashing business checks??
rlcarey Offline
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Galveston, TX
Quote:

we do not cash checks payable to a corporation so that's not an option for our customers




That is a common practice. If you do negotiate items made payable to a business, make sure your corporate resolutions support that action. Most standard resolutions do not authorize that action.

Quote:

i have been told that checks payable to the bank should be accepted only as payment to the bank- not for cash for customer's benefit.




That is also a good policy. If the company really intended that the check be applied, let's say to one of thier loans, you would have a hard time defending providing cash to the presenter - again it might come down to the corporate resolutions and the powers granted to the presenter.

Quote:

so our only option has been checks payable for "cash" endorsed by authorized signer.




Technically, the endorser would not have to be an authorized signer. A check made payable to cash is a bearer instrument. If your state has adopted the Uniform Commercial Code - check UCC 3-109:

3-109. PAYABLE TO BEARER OR TO ORDER.
(a) A promise or order is payable to bearer if it:
(1) states that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;
(2) does not state a payee; or
(3) states that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.
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#538563 - 05/18/06 08:42 PM Re: Cashing business checks??
nemsi Offline
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Joined: Nov 2005
Posts: 383
I should have said "endorsed by the individual receiving the cash".
Thanks for the responses.

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#538564 - 05/18/06 10:01 PM Re: Cashing business checks??
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,786
Cape Cod
I am amazed that none of these responses suggested that the check be payable to the runner and captioned "for petty cash."
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#538565 - 05/19/06 01:22 PM Re: Cashing business checks??
Elwood P. Dowd Offline
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Elwood P. Dowd
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Next to Harvey
Time has been good to me so I've managed to forget most of accounting 201-203. However, I remember very clearly that the text said that a business should replenish its petty cash by issuing a check payable to "Cash" and having an employee negotiate the item. Waldensouth is not describing an "acceptable" practice, it's the "preferred" practice and it's certainly not prohibited by the UCC.

From the bank's perspective the issue is whether the amount is commensurate with petty cash and whether the employee has acceptable identification.

The bank should not cash checks payable to the bank. The risk is particularly great with checks drawn on a business. From any reviewer's standpoint it appears that the check was a payment made to the bank, not an item issued for cash; the bank's negligence would facilitate the fraud.

Obviously, cashing a check payable to "cash" is not the same as cashing a check payable to a business. Since that's the question that started this thread and some folks don't read too closely, I'll just add that cashing checks payable to a business is a lousy banking practice.
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