Thursday, May 29, 2014

The Art of Writing a Cheque



Writing a cheque is a lost art in Australia. Gen Y's and Z's in particular don't seem to use them with confidence, and while the cheque book is a dying financial solution, it still has it's purposes in today's society.

There are still business's who only deal in cash or cheque. Tradies in particular will sometimes request a cheque. If you don't have a cheque book, and are not comfortable dealing in large sums of cash the alternatives are to buy a bank cheque, which tends to carry a cost of between $8-$10, or to purchase a money order from Australia Post for between $9-$23. Besides the cost, there is also the annoying time factor of having to organise a cheque or money order.

For these reasons, it's definitely worth finding out if your bank account offers a cheque book feature, and what the costs are to obtain a cheque book or use the cheques. I have a cheque book against each of my accounts at no additional charge to have or to use.

If you aren't familiar with a cheque or how to write it out, follow my steps to ensure you are not exposed to risk due to a poorly written cheque.

1. This number down the bottom of the cheque is the cheque number. This number will progress sequentially through the book.


2. These numbers are the BSB and account number that the cheque will be drawn from. If you have written a cheque that you do not have funds for in this account, it will dishonour. From time to time a bank may honour this cheque within their own policy. They may choose to overdraw this account, or they may choose to transfer funds from another account where available. Best practice is to only draw a cheque for an amount that you have sufficient funds for.


3. On this line you write the name of the person you are making the cheque out to. It is always best to check this very clearly with the person first, to minimise the chance of the bank rejecting it.


4. The "or bearer" comment is important! If you leave this as it is, the cheque can be forwarded or intercepted by another person and banked into their own account. 


5. When completing "The sum of" portion, the amount of the cheque is written as a word. To minimise the risk of cheque tampering, any remaining space on the top and bottom line should be struck out.


6. The amount of the cheque is also completed on the cheque as a number. As with "The sum of" portion, any remaining space should be struck out.


7. In the date field the date of payment should be filled out. If you future date the cheque, the bank should not allow this cheque to be presented until that date has arrived. This is never a guarantee but is standard practice.


8. At the bottom of the cheque the account holders or signatories sign the cheque. Depending on how many account holders are attached to the account, and how many account holders are required to operate the account together, you may require more than one signature. As a general rule, one person can operate the account and so only one signature is required.


9. The tab to the left is a record that you maintain for yourself of the cheques you have written. It is not compulsory to fill this out, as no one but yourself will ever know, however it is good practice as you never know when you will need this information. The fields for "Brought Forward, Deposits, Withdrawals, Subtotal, and Total" relate to your account balance and transactions. This information is easily tracked online these days but the important thing is to always make sure you have sufficient funds to honour this cheque.


And finally a few tips in using your cheques:
  • The cheque may take up to 5 working days to clear. You may see this as uncleared funds in your account for part or all of this time. However, you should not wait for this period to deposit funds to honour the cheque, you should instead make sure there are sufficient funds immediately.
  • The payee may request fast clearance from their own bank. This means the funds will leave your own account as quickly as the same day you handed over the cheque.
  • The Not Negotiable strike out through the payee and amount is very important. If your cheque does not include this, you should strike out the cheque yourself as it protects you. It means that the person who banks the cheque does not have greater rights that the person who wrote it.
Hopefully this will help you decide whether maintaining a cheque book is right for you and assist in writing your cheques correctly! 

Will you order a cheque book now?

2 comments:

  1. I didn't even know chequebooks were still around! I haven't had one for years, but there have been occasions where I've thought one would be handy, like with tradies as you say.

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  2. We rarely use ours but they do come in handy from time to time.

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