What should a business ensure and check for when a payment is being made by cheque?

What should a business ensure and check for when a payment is being made by cheque?

• A. That the cheque is signed
• B. That the payee name on the cheque is correct
• C. That the amount in words is the same as the amount in figures
• D. That the cheque is still in date

Answer: (A)

When paying by cheque, the most important requirement is authorisation by the drawer through a signature. The cheque is essentially an instruction to the bank to transfer funds, and the signature is what shows the account holder has approved that instruction. Without a signature, there’s no valid authorization, so the bank will not pay the cheque. Other checks—such as making sure the payee name is correct, that the amount written in words matches the figures, and that the cheque is within its valid date—are all good practices to prevent errors and fraud. But none of these can authorize payment if the cheque isn’t signed in the first place.

When paying by cheque, the most important requirement is authorisation by the drawer through a signature. The cheque is essentially an instruction to the bank to transfer funds, and the signature is what shows the account holder has approved that instruction. Without a signature, there’s no valid authorization, so the bank will not pay the cheque.

Other checks—such as making sure the payee name is correct, that the amount written in words matches the figures, and that the cheque is within its valid date—are all good practices to prevent errors and fraud. But none of these can authorize payment if the cheque isn’t signed in the first place.