Bookkeeping For Dummies
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Almost every dime that comes into your business flows through your business’s checking account (at least that’s what should happen). Whether it’s cash collected at your cash registers, payments received in the mail, cash used to fill the cash registers, petty cash accounts, payments sent out to pay business obligations, or any other cash need, this cash enters and exits your checking account.

That’s why your checking account is your main tool for protecting your cash flow.

Choosing the right bank

Finding the right bank to help you set up your checking account and the controls that limit access to that account is crucial. When evaluating your banking options, ask yourself the following questions:

  • Does this bank have a branch that’s conveniently located to my business?

  • Does this bank operate at times when I need it most?

  • Does this bank offer secure ways to deposit cash even when the bank is closed?

    Most banks have secure drop boxes for cash so you can deposit receipts as quickly as possible at the end of the business day rather than secure the cash overnight yourself.

Visit local bank branches yourself, and check out the type of business services each bank offers. Pay particular attention to

  • The type of personal attention you receive.

  • What type of charges may be tacked on for this personal attention.

  • How questions are handled.

Some banks require business account holders to call a centralized line for assistance rather than depend on local branches. Some banks are even adding charges today if you use a teller rather than an ATM (automatic teller machine).

Other banks charge for every transaction, whether it’s a deposit, withdrawal, or a check. Many have charges that differ for business accounts, and most have charges on printing checks. If you’re planning to accept credit cards, compare the services offered for that as well.

Deciding on types of checks

After you choose your bank, you need to consider what type of checks you want to use in your business. For example, you need different checks depending upon whether you handwrite each check or print checks from your computerized accounting system.

If you plan to write your checks, you’ll most likely use a business voucher check in a three-ring binder; this type of check consists of a voucher on the left and a check on the right. This arrangement provides the best control for manual checks because each check and voucher are numbered.

[Credit: Check samples courtesy of]
Credit: Check samples courtesy of

When a check is written, the voucher should be filled out with details about the date, the check’s recipient, and the purpose of the check. The voucher also has a space to keep a running total of your balance in the account.

If you plan to print checks from your computerized accounting system, you’ll need to order checks that match that system’s programming. Each computer software program has a unique template for printing checks. The figure shows a common layout for business voucher checks printed by your computerized accounting system.

[Credit: Check samples courtesy of]
Credit: Check samples courtesy of

You can see there are actually three sections in a blank computerized check: the check in the middle with two relatively blank sections on either side.

For one of the blank sections, you set up your computer accounting system to print out the detail you’d expect to find on a manual voucher — the date, name of the recipient, and purpose of the check.

You keep this stub as a control for check use. In the other blank section, you print the information that the recipient needs. For example, if it’s a check to pay an outstanding invoice, you include all information the vendor needs to properly credit that invoice, such as the amount, the invoice number, and your account number.

If it’s a payroll check, one of the blank sections should contain all the required payroll information including amount of gross check, amount of net check, taxes taken out, totals for current check, and year-to-date totals. Send the check and portion that includes detail needed by your vendor, employee, or other recipient to whoever you intend to pay.

Initially, when the business is small, you can keep control of the outflow of money by signing each check. But as the business grows, you’ll probably find that you need to delegate check-signing responsibilities to someone else, especially if your business requires you to travel frequently.

Many small business owners set up check-signing procedures that allow one or two of their staff people to sign checks up to a designated amount, such as $5,000. Any checks above that designated amount require the owner’s or the signature of an employee and a second designated person, such as an officer of the company.

Arranging deposits to the checking account

Of course, you aren’t just withdrawing from your business’s checking account (that would be a big problem). You also need to deposit money into that account, and you want to be sure your deposit slips contain all the needed detail as well as documentation to back up the deposit information.

Most banks provide printed deposit slips with all the necessary detail to be sure the money is deposited in the appropriate account. They also usually provide you with a “for deposit only” stamp that includes the account number for the back of the checks. (If you don’t get that stamp from the bank, be sure to have one made as soon as possible.)

Whoever opens your business mail should be instructed to use that “for deposit only” stamp immediately on the back of any check received in the mail. Stamping “for deposit only” on the back of a check makes it a lot harder for anyone to use that check for other than its intended business purposes.

If you get both personal and business checks sent to the same address, you need to set up some instructions for the person opening the mail regarding how to differentiate the types of checks and how each type of check should be handled to best protect your incoming cash, whether for business or personal purposes.

To secure incoming cash even more carefully, some businesses set up lock box services with a bank. Customers or others sending checks to the business mail checks to a post office box number that goes directly to the bank, and a bank employee opens and deposits the checks right into the business’s account.

You may think that making bank deposits is as easy as 1-2-3, but when it comes to business deposits and multiple checks, things get a bit more complicated. To properly make deposits to your business’s checking account, follow these steps:

  1. Record on the deposit slip the numbers of all checks being deposited as well as the total cash being deposited.

  2. Make photocopies of all checks being deposited so that you have a record in case something gets lost or misplaced at the bank.

  3. After you make the deposit, attach the copies of all the checks to the deposit receipt and add any detail regarding the source of the deposited cash; file everything in your daily bank folder.

About This Article

This article is from the book:

About the book author:

Lita Epstein, MBA, designs and teaches online courses in investing, finance, and taxes. She is the author of Trading For Dummies and Bookkeeping Workbook For Dummies.

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