the sorting code (six digits, expressed as three pairs)
the account number (eight digits).
These are printed in magnetic ink using a stylized typeface such as OCRA (optical character reading ‘A’) to allow cheques to be automatically read. These numbers sometimes appear with other marks. When the cheque is presented for payment, the amount is typed on in the same typeface, allowing the appropriate accounts to be cleared automatically.
The cheque must be completed by the payer, who adds:
the name of the payee (who you are paying)
the amount of the payment, in words and figures
the date of the cheque
signature.
The cheque must be completed in ink, which includes rubber stamps (not recommended, but legal) and printing from computers or other machines. Cheque books and any rubber stamps must be keep secure when not in use.
In writing out the amount in words, odd pence may be indicated numerically, such as ‘One hundred and forty-nine pounds 26 ’ for £149.26. It is advisable for lines to be drawn to fill in the spaces after the payee and amount to prevent additional figures being added.
The date is usually written in numerical form of day, month, year. Note that the USA uses the convention of month, day, year, so 1 March 2012 is 01.03.12 in the UK, but 03.01.12 in the USA.
Strictly speaking, a cheque does not need to be issued using a cheque book provided by the bank. It is legal to issue a cheque on a piece of plain paper, or using someone else’s cheque book, or even writing a cheque on an inanimate object. Cheques have been presented written on paving stones and dustbin lids, usually as a form of protest or publicity stunt. However, such practices are not recommended. There can be an increased risk of error, and there will certainly be additional bank charges.
One point cannot be made too strongly: a signatory must never sign a blank cheque. There are no exceptions to this absolute rule. Signing a few blank cheques may seem the sensible thing to do when the treasurer is going on holiday, but it is a form of fraud on the church in that the signatory is flouting the required security for issue of cheques. An auditor who discovers such a practice should report this. The church should have sufficient signatories to cover temporary absences. If necessary, an additional signatory can be created for a specific period.
Bank charges
The treasurer must always know the basis of bank charges, including the charge for paying in cash, as churches may handle considerable quantities of coins. Bank charges of £25 a month may not seem much until you realise that is £300 a year.
Bank charges become very steep for any bank if you incur an unauthorised overdraft. Interest is also charged at a high rate, often above 25%.
The bank is not obliged to pay cheques which exceed the balance in your account or an agreed overdraft. If you do exceed the limit, the bank may dishonour or ‘bounce’ your cheque. This is not only embarrassing to the church, but also incurs a charge. The charge can exceed the cheque that is dishonoured. You also pay interest at a much higher rate. Banks are usually coy about disclosing overdraft rates in sales literature, and usually only provide details in branches.
Although most banks now use the Faster Payments process and funds are usually transferred in a few hours, the treasurer must remember that cheques may take three days to clear. Also, charges can easily put a bank account into overdraft before you are aware of the problem. Suppose you issue a £10 cheque believing that you have £40 in the account, but unknown to you the bank has just deducted £31 in bank charges. As you have only £9 in the account, the bank returns the cheque and deducts another £30. Because this puts your account in overdraft, it charges £12.50. You have been hit for £42.50 charges plus high interest of perhaps £2.50 for the few days giving a total of £45 – and you still have to pay £10 and explain why your cheque bounced.
In addition to bank charges, it is easy for a treasurer to overlook a payment when keeping a record of the balance on the account. It is also possible that a cheque which you pay in may not be honoured and so your account does not receive the funds you expect.
The moral is not to run the bank account too low – for example by transferring too much to a deposit account. Have a buffer of perhaps £250 below which you do not allow the account to fall. This provides a safety margin, and prevents unpleasant surprises. It is true that you will lose interest, but the amount is small.
There are other perhaps more acceptable methods for reducing bank charges:
use electronic banking (explained below) where the charges are often much lower, and where you can keep a closer eye on your account without having to wait for the statement to arrive
use a payment card or charge card, where the charges are usually lower than writing a cheque
keep petty cash and use that for paying small bills, such as the milkman
pay regular payments by direct debit
draw cash from a machine operated by your bank rather than cashing a cheque over the counter (though you will not be able to obtain notes and coins in the denomination you want)
pay cheques in batches rather than individually
pay as infrequently as possible, such as quarterly rather than monthly, or monthly rather than weekly
pay some of the collection into petty cash rather than into the bank
ask donors to pay you by standing order.
Internet banking
Anyone with a computer connected to the Internet can enjoy the benefits of Internet banking, namely:
lower bank charges
ready access to statements at any time of the day
an ability to leave messages and transact some business.
There are some bank accounts such as Egg which only operate on the Internet. Most ordinary cheque book accounts come with an Internet access facility, making it an Internet account. You are given a website address to log into. Typically, you are given a user identification number of eight or more digits and letters. You choose a password which should not be anything memorable or obvious, and should be changed periodically. Typically the program asks you to select key letters from your password from a list offered to you. Suppose you chose Ezekiel as your password. The computer may ask you for the second, fourth and fifth letters. So you scroll down three lists of the alphabet to select Z, K and I. If you get it wrong, it will usually allow you one more go before barring further attempts. Otherwise someone who obtained your identification number from seeing the card on your desk could try all the books in the Bible and other likely words until getting lucky.
Internet services on a bank account are usually provided free by the bank, as it considerably reduces their costs.
Payment cards
Banks usually now provide free payment cards or debit cards to customers, including business customers and churches. These are the same size as credit cards but work differently.
The payment is debited from your account when you make the payment. There is no bill to pay as with credit cards. It is vital that a strict control is kept over such cards and that the church authorities approve the treasurer having one. In effect, the treasurer is given unlimited signing power on the account.
In 2005, banks introduced chip and pin cards. Instead of signing a slip of paper, the customer enters four digits into a machine. If the PIN number is correct, the payment is authorized. For this reason, the PIN number should not be obvious, such as your date of birth. It can also be changed periodically in the bank’s cash machines. Perhaps the best mnemonic for a PIN number is to remember a four-word phrase where the number of letters in each word is the number. So ‘the forgiveness of sins’