According to the U.S. Federal reserve, the number of checks paid between 2006 and 2009 declined 7.1 percent and debit card payments rose nearly 15 percent. Although consumers are slowly converting to a “paperless” world, it is important for business owners to offer multiple payment options to customers. Accepting checks can be risky, but if you want your business to accommodate all types of customers, it is a necessity.
Doing Business As
Checks written to your business should include your business name in the “Pay to the Order of” field. If you are a sole proprietor, you are the only person who can cash the check. Open a checking account in your name and attach a “doing business as” to the account. This way, if a customer writes out the check to you or your business, you can cash either using the business account. If your business is anything other than a sole proprietorship, you should designate authorized signers to the business account. Depending on the state in which you conduct business, you might be required to register your business.
Open the Account
How you must open the bank account depends solely on the type of business you own. Some banks allow business owners to open accounts online, but if you own a business that provides money services, a telemarketing business, one that deals with precious metals, a government entity or one that promotes gambling, you must open the account in person. To open a sole proprietorship account, you must provide your Social Security number or business tax ID and a document that shows both your business’s name and your name. To open an account for any other type of business, you must provide the business tax ID number and any other organizing document proving you are registered with the state. For more information on documents required to open a business bank account, contact your bank.
Separation of Business and Personal Finances
Opening a business bank account not only allows you to cash business checks, it also helps you to improve the financial organization of your business. Using one bank account for your personal and business transactions makes it difficult to separate your business transactions at tax time. Although you might keep a detailed ledger of your profits and expenses, having a separate bank account is another way to document each financial transaction that occurs within your business.
Processing Checks in Debit Form
Traditionally, when a customer makes a purchase with a check, the customer must sign and present the check at the time of purchase. The business owner must then deposit the check and wait days for the check to clear. With advanced technology, business owners can accept checks and receive the money from the check within minutes by electronic funds transfer, or EFT. Using an electronic check conversion machine, you slide the check through a check scanner, which is typically attached to your credit card terminal. The machine scans the check and request the transaction amount and driver’s license or ID number of the customer. The machine checks the customer’s account to ensure the funds are available and transfers the funds to your account. Having the ability to cash checks immediately reduces the risk of accepting bad checks and offers your customer several safe payment options.