Limited time only*
(866) 570-3842
Mon - Fri, 9am - 8pm ET
CHECKS
Business Check Endorsements: Types & Restrictions
You receive a check for payment for your business. What next? You sign the back of the check and then take it to the bank, right? Not so fast. If not endorsed in the right way and at the right time, you could be putting your business at risk.
Here’s what to keep in mind when you need to endorse a check.
When to endorse
You should never endorse a check before you're ready to deposit or cash it. The moment you sign the back of a check, it becomes negotiable. Anyone who gets their hands on it can take it to the bank and cash it. When it comes to an endorsed check, you can’t trust the lock on your car to keep it safe. You can’t trust the safe at work. The safest place to keep a signed check is on deposit at your bank.
Types of endorsements
Endorsing a check is as simple as flipping it over and signing your name, right? Before you do that, consider these five types of check endorsements. They might fit your needs better than a simple signature.
There are five basic types of check endorsements:
1. Qualified endorsement
With a qualified endorsement, you remove yourself from any responsibility should the check get returned. Typically, this endorsement includes language like “Without recourse.”
Of course, your bank probably won’t accept your check with this type of endorsement since you’re basically telling them they can’t recoup the funds from your account if the check bounces.
2. Restrictive endorsement
Like a qualified endorsement, a restrictive endorsement also places a condition on the negotiability of the check. The most common restriction is “for deposit only.”
Unlike qualified endorsements, banks receive this type of endorsement all the time. They’ll usually accept it without question.
3. Special endorsement
A special endorsement allows you to make your business check payable to someone else. On the back of the check, you would write “Pay to the order of Jane Doe” and then sign it. This effectively turns the check ownership over to that person or entity.
However, banks don’t usually recommend that you go this route. When Jane Doe attempts to cash the check, the bank will likely require that you’re present for the transaction to confirm the validity of your special endorsement.
4. Conditional endorsement
A conditional endorsement works similarly to a special endorsement, except that you’re adding a caveat to the endorsement. The language specifies that something needs to happen before the check becomes payable. For example, “Payable to Jane Doe upon successful completion of roof replacement.” Then you’d sign it. This turns the check over to her.
Like the special endorsement, your bank may frown down on this type of endorsement and even outright refuse to pay the check. In the case of our Jane Doe example, she needs to replace a roof before negotiating the check. How would the bank verify that?
5. Blank endorsement
This is the most common type of endorsement. If you flip a check payable to you over and sign the back without adding any restrictive language, you’ve just blank endorsed it. But don’t forget, once you sign a check like this, it’s immediately negotiable. Make sure you deposit it or cash it right away so someone else doesn’t.
Endorsement stamps
Endorsement stamps are certainly faster and more convenient than hand signing a stack of checks. For those who regularly endorse a lot of checks, it may make sense to get a stamp. If you decide to use an endorsement stamp, make sure your deposit text follows a format like this:
Additionally, when you stamp your checks, always check that the stamped endorsement is clear and legible. If the check gets stolen or misplaced, it’ll be harder for someone to alter the deposit information.
QuickBooks Endorsement Stamp is self-inking, so you’ll get better quality impressions and save money with ink refill pads.
For Sales:
QuickBooks Checks & Supplies
Customer ServicePhone: (866) 570-3842 Mon - Fri, 9am - 8pm ET
