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Here is a nice article by one of the CPA’s in the PBO Community, Roy Dela Cruz:

In my rank-and-file days in bank, I was assigned as the CA/SA bookkeeper. CA/SA stands for checking account and savings account, and one my function then was monitoring the balances of the clients on both products. During my 2-year stint at the department, I have closed quite a number of checking accounts for the reason that they are improperly handled.

A checking account is important to an entrepreneur, as it is a convenient way to pay bills, obligations and purchases, and it’s easier to document unlike a credit cards. If properly handled, it can be a great business and financial tool. If not, it can cause the entrepreneur’s downfall in business.

For one, clients who are calling on the phone most of time asking for their balance, is a tell-tale sign that they do not balance their checking account. You don’t have to be an accountant to balance your checking account, as every checkbook comes with a registry where you can register all your deposits and check issuances. By doing that, you can already see at a glance your balance and you would be able to manage your account better.

Unfortunately, a large percent of checking account holders don’t do that. And since they are not aware of their balance, most of the times they issue checks that are beyond their available balance. This results to their account incurring an overdraft or a negative balance. And if it is not funded within the allotted bank’s cut-off time, it will be returned, which is why it was called a bouncing check.

Bouncing checks are not healthy for an entrepreneur’s image (and finances), aside from paying additional charges (P1,000 plus 200 per P40,000 per day, plus another P1,000 plus P200 per P40,000 per day if it was returned), it also sends a signal to the supplier or whoever is the payee of the check that he is not credit worthy.

And if you are incurring occasional overdrafts, your account is a candidate to be closed by the bank due to improper handling. Once this happened, you will have a hard opening another checking account with other banks as your name will be already reported to them.

Another common problem are those checking account bundled with an ATM card. It is a convenient way for the account holder to get money from his account especially in emergencies where the bank is closed and he can’t encash his check. The problem with this is that sometimes, the account holder lost tracks of his withdrawals, and his balance, which could result to another overdraft when his issued checks start coming in.

And one last problem that I have encountered in handling these accounts then are irresponsible account holders who lost their checkbooks, gets their checks stolen, or dropped them somewhere -- pre-signed and all. Of course, they can report it to the bank and request stop payment for the checks. The problem with this is that, they are still subject to service charge. The logic for this being, account holders are responsible for their accounts as well as their checkbooks. As such, they are expected to safekeep the same and that it is only them who will have access to the check.

Besides, a lost check is most often used as an excuse by the account holder who wants to delay payment especially when they don’t have enough money. That’s why, the bank is very strict on this.

Checks are convenient tools, they are negotiable instruments and widely used in business. Having a checking account is actually a privilege not given to all. So if you have one, be sure to take note of those stated above and manage your account wisely.

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