Keeping your finances well organized when you run a business is paramount. This importance goes beyond just cutting costs. Good financial organization and management will help you to make better business and financial decisions, use funds effectively and cope with sudden expenditures easier. You can improve the profitability of your business, encourage employees to save money and, generally, enhance the overall value of the business.
As a business owner, it’s likely you’re going to use voucher checks. This post looks at what voucher checks are, how to use them and what can go wrong if you fill them in the wrong way.
What is a Voucher Check?
A voucher check is a cross between a check and a voucher. The check contains information about the parties to a transaction and, in doing so, creates an auditable paper trail about the payment of the check. You may also see the terms “remittance advice” or “payroll check” when it comes to voucher checks. A voucher check enables employees to see their pre-tax information, review how much of their income is being allocated for taxes and how these deductions are being organized.
Use of Voucher Checks
You’ll see companies use them in their payroll department. A paper trail is becoming common practice for payroll, despite direct deposit becoming more and more the norm for paying employees. In these cases, the employee will receive a check with the watermark altered to indicate that the employer has already issued the payment and the check itself is not for deposit.
Vendors also use voucher checks. They issue them when an invoice matches with an order and documentation that this order has been completed. For the accounts payable, having a file of voucher records for payments comes in handy for resolving payment disputes and for preparing books for internal month-end closings.
Understanding How to Use and Fill Out Voucher Checks
Voucher checks have three main parts. They consist of:
- A check
- A voucher for the recipient of the payment (the payee)
- A voucher for the issuer.
Voucher checks contain several different details:
- Voucher number
- The name of the payee
- The date
- The gross amount if there are any deductions
- The net amount if there are any deductions
- Any memo notes that need to be recorded.
A voucher check will also contain information about amounts directed towards savings or retirement plans, health insurance plans or other health insurance coverage. If there are issues around the payments, both the issuer and the recipient of the voucher check have a record of the details.
What Happens When a Voucher Check is Filled in the Wrong Way?
This is bad news for payroll or a vendor. Businesses must file their taxes correctly with the Internal Revenue Service, so good book-keeping and financial management is crucial. A slip-up with a voucher check could land the business in hot water with the authorities.
Not only this, however, but the purpose of issuing voucher checks is to help the business maintain a manageable record of transactions. Incorrect voucher check issue could see the business make further mistakes with its numbers if the company is basing any further numbers on the amounts in the checks.
The misleading numbers from the checks could then persuade the business owner to make mistakes when it comes to decisions regarding the business. They may not invest as much money in equipment or services because they think they’ve already spent it on salaries. Alternatively, they may spend too much in the belief they have more money for this than they really have.
Voucher checks are a way for to make payments and keep a record of the details of the payment, which is important in business and can help resolve disputes about payments. Employees can also see any deductions made and, if they have any questions, ask their employer about them.