Checking account management

July 22, 2009 by Roy
Filed under: entrepreneur, finance, management, Money, roysville

In my early years in the bank, one of my first assignments was as a CA/SA bookkeeper. One of my duties then was to monitor the balances of checking and savings accounts of our clients. Although I was more particular on the checking accounts, and I have closed quite a number of accounts then because some people don’t how to manage checking accounts.

We all know that a checking account is an important tool to an entrepreneur. Aside from it being a convenient way of paying obligations, it also allows for easier recording and monitoring of expenses. However, as great as a financial tool it is, the checking account can cause the entrepreneur’s downfall when improperly handled.

You really don’t need to have a complicated accounting system to be able to manage your account well. It’s as simple as recording your deposits to your account, as well as your check issuances. That way, you would be able to see at a glance your current balance, and how much you can issue a check to.

Clients who call the bank to ask their balance is a tell-tale sign of an account holder who does not monitor his account well. A simple lapse could cause him to issue a check beyond his account’s balance, and it’s hardly the bank’s fault.

When such a scenario occur, their account would incur an overdraft or a negative balance, and if the needed funds were not deposited within the bank’s allotted time, said check will be returned. Hence the term ‘bouncing check.’

This can cause severe damages to the entrepreneur’s image, as well as finances.

He will be made to pay 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. Note: Please informed me if it’s already updated), and at the same time the payee of the returned check would have the impression that the entrepreneur (issuer) is not credit worthy.

Frequent occurrences of overdrafts would cause closure of your checking account by the bank. That’s only half of the problem, an account closed due to improper handling would be echoed through other banks, via the negative data bank (NDB). The possibility of opening a new checking account with other banks would be then difficult, if not impossible.

Checking accounts with ATM access too? I would advise against it, unless you really have control over your finances. Because you can withdraw from any ATM anytime, you sometimes forget about the outstanding checks you have issued. This again, could result to an overdraft.

Checks are negotiable instruments and are widely used in business. But opening a checking account is not a privilege that is available to every individual. So if you have one, be sure to manage it wisely. Take note of the precautions stated above.