Good Morning Bloggers, it's Wednesday again, so here is your "workshop" segment for the week.
CHEQUE PAYMENTS
The issue of cheque payments is a multi faceted one. It includes cheque preparation and cheque signing as well as all the controls and government regulations that go with it. Not to mention the banks requirements as well. It is to ensure that cheques are properly made out in respect of authorized transactions and signed by authorized personnel. Cheques can easily be forged and it is therefore well worth your while to ensure that the correct procedures and controls are in place for your own protection. In this electronic age internet banking has become the norm, but these transactions should be prepared as well as executed in exactly the same manner, and with even more controls than cheque transactions.
D.1 Cheque Preparations
1. Nowadays with the advent of internet banking and the fact that all the banks are linked, in the manner in which they are, it is very seldom that there is a need for a 3rd party payment. However, having said that, it is in your own best interests to ensure that you know how to make a 3rd party payment. Okay so the name of my business is “Internal Audit” and I, in my personal capacity have purchased a car from Jan’s Motors. Jan’s Motors used to be down the road from me and I used to go in there every month and make my payment. I have moved to a little Dorpie in the Karoo and have to make a payment to Jan’s Motors every month. Jan’s Motors do not have the facility to put me onto a debit order system as they are only a small one man business. Jan’s Motors banks with Old Mutual Bank who are a division of Nedcor. There is no Old Mutual Bank in the Dorpie in the Karoo. So in order to protect myself and Jan’s motors, my cheque must be made out as follows – remember it is a cheque in the name of Internal Audit. So I make it payable to Old Mutual Bank – For credit Account Jan’s Motors Acc # 2534 136 7299 – for Account of N Viljoen – Acc # 006. Nedbank then know that the cheque must be paid into Old Mutual Bank account, for the credit of Jan’s Motors in their books, for credit account of N Viljoen in his books. They are then able to capture all the relevant data in the relative fields and the money will appear in the books of Old Mutual bank for the credit of Jan’s Motors and then on Jan’s Motors bank account there will be a reference that N Viljoen paid money into the bank. It is not a direct payment into an account, which is what we are used to doing. When you get paid your salary or a client pays you, the money goes directly from his/their account into yours – this one is going from your business account, to Nedbank – then from Nedbank into Old Mutual Bank’s account, then from Old Mutual Bank’s account into Jan’s Motors’ Account for credit of your personal loan. It is very important to get the logical and consecutive details correct because if you miss out one leg of the transaction the money will go into what they call a “suspense account” it takes forever to find it in there – it’s like a huge black hole that money goes into when the banks do not know where to put it! So be careful and make sure that it has been done correctly.
2. It is not a good idea to make out a cash cheque. Firstly you are putting yourself at risk as there is no audit trail as to where that money went to. If you want to cash a cheque for petty cash purposes, it is preferable to write the cheque out to the person who is going to cash the cheque. For example pay – N Viljoen – Petty Cash. This cheque of course then must not be crossed, I would then have to cash the cheque with the necessary ID documentation and the audit trail would reflect that I cashed the cheque for petty cash purposes. This would then be checked back to the petty cash book by the Bookkeeper/Accountant and hopefully it would reflect that the petty cash was replenished with the same amount for which the cheque was encashed.
Paying for services and purchasing stuff by means of a cash cheque is not a good idea at all. Please refrain from doing so.
3. Government legislation has been passed, stating that all cheques (other than cash) must be crossed with the crossing “NOT TRANSFERABLE”. Furthermore it is no longer possible to cancel the crossing on a cheque. Most businesses now have the NOT TRANSFERABLE crossing pre-printed on the face of the cheque. It is advisable, in the instances of small businesses to either have the cheques pre-printed in this manner (although this does attract an additional charge from the bank) or alternatively have a stamp made up with the NOT TRANSFERABLE crossing on it. With the advent of debit cards, all petty cash can be drawn by means of an ATM withdrawal and it is no longer necessary or even cost effective to use cheques for this purpose.
4. Cancelled cheques must be clearly marked “CANCELLED” and dated. The cheque must be kept available for subsequent inspection. It is probably a good idea to attach the cancelled cheque to the stub by means of a staple or sello tape. It forms part of the audit trail and you may be required to prove that the cheque has in fact been cancelled and it will not be presented for payment at any stage.
5. It has been legislated that cheques bearing any kind of amendment or alteration will no longer be honoured. In view of the fraud that has been taking place with regard to cheques, it was decided that any cheques that had any kind of alteration and/or amendment would no longer be en-cashed or honoured and would therefore be returned with the answer “cheque altered”. So when you make a mistake, no matter how small – don’t get clever and think that you will put it through and hope for the best. Every cheque that is returned is an added cost to yourself and the person who tried to deposit it. Some of the banks charge up to R80.00 to return a cheque. So rather just cancel the cheque and start again.
6. Be sure to write clearly and make sure that the amount in words and figures correspond. Make sure that the ink in your pen has not splodged and made a mess – if it has – rather cancel the cheque and re-issue a new one. Make sure that the cheque is dated correctly and that you have signed in full. Fill out your cheque counterfoil, so that you know what the cheque was for – believe me you are not going to remember in 6 months time.
7. Before actually preparing the cheque, it is a good idea to prepare the Cheque Requisition. This is a must when there is more than one person in the Company and a nice to have even if there is only one of you – it gets you into a good habit. The cheque requisition form should be completed in full with all the details that should be the cheque , including the cheque #, the date of the cheque was made out. In the case of big companies, the name of the Division requesting the cheque should be recorded. The name of the Payee must also be stipulated. A description of why the payment needs to recorded (e.g. telephone account for the period xxx date to xxx date), where on the General Ledger the expense needs to be allocated – this is very important where for example a lump sum payment is made where the allocation needs to go to different sub-headings (e.g. Rentals that include electricity, water, rates and taxes, cleaning etc – these are usually different sub-headings on the General Ledger). The amount before (or excluding) VAT, the VAT amount and then the total of the payment. The person requesting the payment must sign and write their name – legibly, the Head of the Department or the person authorizing the payment must sign and write their name – legibly and of course the person(s) signing the cheque must also sign. If there are any special instructions, for example that the cheque must be deposited and the details of the bank account – these must also be recorded. A copy of a cheque requisition form is attached for ease of reference. The cheque requisition form must also be used for Internet payments, and should then be attached to a printed copy of the payment. If you would like a copy of a Cheque Requisition Form, they are available at a cost.
The issue of cheque payments is a multi faceted one. It includes cheque preparation and cheque signing as well as all the controls and government regulations that go with it. Not to mention the banks requirements as well. It is to ensure that cheques are properly made out in respect of authorized transactions and signed by authorized personnel. Cheques can easily be forged and it is therefore well worth your while to ensure that the correct procedures and controls are in place for your own protection. In this electronic age internet banking has become the norm, but these transactions should be prepared as well as executed in exactly the same manner, and with even more controls than cheque transactions.
D.1 Cheque Preparations
1. Nowadays with the advent of internet banking and the fact that all the banks are linked, in the manner in which they are, it is very seldom that there is a need for a 3rd party payment. However, having said that, it is in your own best interests to ensure that you know how to make a 3rd party payment. Okay so the name of my business is “Internal Audit” and I, in my personal capacity have purchased a car from Jan’s Motors. Jan’s Motors used to be down the road from me and I used to go in there every month and make my payment. I have moved to a little Dorpie in the Karoo and have to make a payment to Jan’s Motors every month. Jan’s Motors do not have the facility to put me onto a debit order system as they are only a small one man business. Jan’s Motors banks with Old Mutual Bank who are a division of Nedcor. There is no Old Mutual Bank in the Dorpie in the Karoo. So in order to protect myself and Jan’s motors, my cheque must be made out as follows – remember it is a cheque in the name of Internal Audit. So I make it payable to Old Mutual Bank – For credit Account Jan’s Motors Acc # 2534 136 7299 – for Account of N Viljoen – Acc # 006. Nedbank then know that the cheque must be paid into Old Mutual Bank account, for the credit of Jan’s Motors in their books, for credit account of N Viljoen in his books. They are then able to capture all the relevant data in the relative fields and the money will appear in the books of Old Mutual bank for the credit of Jan’s Motors and then on Jan’s Motors bank account there will be a reference that N Viljoen paid money into the bank. It is not a direct payment into an account, which is what we are used to doing. When you get paid your salary or a client pays you, the money goes directly from his/their account into yours – this one is going from your business account, to Nedbank – then from Nedbank into Old Mutual Bank’s account, then from Old Mutual Bank’s account into Jan’s Motors’ Account for credit of your personal loan. It is very important to get the logical and consecutive details correct because if you miss out one leg of the transaction the money will go into what they call a “suspense account” it takes forever to find it in there – it’s like a huge black hole that money goes into when the banks do not know where to put it! So be careful and make sure that it has been done correctly.
2. It is not a good idea to make out a cash cheque. Firstly you are putting yourself at risk as there is no audit trail as to where that money went to. If you want to cash a cheque for petty cash purposes, it is preferable to write the cheque out to the person who is going to cash the cheque. For example pay – N Viljoen – Petty Cash. This cheque of course then must not be crossed, I would then have to cash the cheque with the necessary ID documentation and the audit trail would reflect that I cashed the cheque for petty cash purposes. This would then be checked back to the petty cash book by the Bookkeeper/Accountant and hopefully it would reflect that the petty cash was replenished with the same amount for which the cheque was encashed.
Paying for services and purchasing stuff by means of a cash cheque is not a good idea at all. Please refrain from doing so.
3. Government legislation has been passed, stating that all cheques (other than cash) must be crossed with the crossing “NOT TRANSFERABLE”. Furthermore it is no longer possible to cancel the crossing on a cheque. Most businesses now have the NOT TRANSFERABLE crossing pre-printed on the face of the cheque. It is advisable, in the instances of small businesses to either have the cheques pre-printed in this manner (although this does attract an additional charge from the bank) or alternatively have a stamp made up with the NOT TRANSFERABLE crossing on it. With the advent of debit cards, all petty cash can be drawn by means of an ATM withdrawal and it is no longer necessary or even cost effective to use cheques for this purpose.
4. Cancelled cheques must be clearly marked “CANCELLED” and dated. The cheque must be kept available for subsequent inspection. It is probably a good idea to attach the cancelled cheque to the stub by means of a staple or sello tape. It forms part of the audit trail and you may be required to prove that the cheque has in fact been cancelled and it will not be presented for payment at any stage.
5. It has been legislated that cheques bearing any kind of amendment or alteration will no longer be honoured. In view of the fraud that has been taking place with regard to cheques, it was decided that any cheques that had any kind of alteration and/or amendment would no longer be en-cashed or honoured and would therefore be returned with the answer “cheque altered”. So when you make a mistake, no matter how small – don’t get clever and think that you will put it through and hope for the best. Every cheque that is returned is an added cost to yourself and the person who tried to deposit it. Some of the banks charge up to R80.00 to return a cheque. So rather just cancel the cheque and start again.
6. Be sure to write clearly and make sure that the amount in words and figures correspond. Make sure that the ink in your pen has not splodged and made a mess – if it has – rather cancel the cheque and re-issue a new one. Make sure that the cheque is dated correctly and that you have signed in full. Fill out your cheque counterfoil, so that you know what the cheque was for – believe me you are not going to remember in 6 months time.
7. Before actually preparing the cheque, it is a good idea to prepare the Cheque Requisition. This is a must when there is more than one person in the Company and a nice to have even if there is only one of you – it gets you into a good habit. The cheque requisition form should be completed in full with all the details that should be the cheque , including the cheque #, the date of the cheque was made out. In the case of big companies, the name of the Division requesting the cheque should be recorded. The name of the Payee must also be stipulated. A description of why the payment needs to recorded (e.g. telephone account for the period xxx date to xxx date), where on the General Ledger the expense needs to be allocated – this is very important where for example a lump sum payment is made where the allocation needs to go to different sub-headings (e.g. Rentals that include electricity, water, rates and taxes, cleaning etc – these are usually different sub-headings on the General Ledger). The amount before (or excluding) VAT, the VAT amount and then the total of the payment. The person requesting the payment must sign and write their name – legibly, the Head of the Department or the person authorizing the payment must sign and write their name – legibly and of course the person(s) signing the cheque must also sign. If there are any special instructions, for example that the cheque must be deposited and the details of the bank account – these must also be recorded. A copy of a cheque requisition form is attached for ease of reference. The cheque requisition form must also be used for Internet payments, and should then be attached to a printed copy of the payment. If you would like a copy of a Cheque Requisition Form, they are available at a cost.
No comments:
Post a Comment