Cheque payments for businesses

By Annapoorna


Updated on: Jan 10th, 2022


3 min read

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Cheques are used to make safe and secure payments from the payer’s account to the payees’ account. They can even be used to make utility bills, government payments, etc.

Meaning of cheque

A cheque is an instrument, when issued to a bank, directs it to pay the specified amount to the person mentioned in the cheque. The person who writes the cheque is called the drawer or payer, and the person to whom the cheque is written is called the drawee or payee. A payee can either encash the cheque or get the amount deposited in his bank account. 

In simple words, a cheque can be defined as a negotiable instrument by which one party instructs a bank to transfer money to another party. It can be issued against a savings bank account or a current bank account.

Who uses cheques and their importance?

A cheque can be used by any individual, firm or corporate body. Businesses use cheques to meet their financial obligations. These obligations can be office expenses, vendor payments, taxes, interest payments or any other liability.  

Cheques help the business to keep control over the payments made. It is a secure option since hard cash is not involved during the transfer process. Further, account payee cheques and crossed cheques are even more secure as the amount can only be deposited in the payee’s account. Thus, the fear of loss is minimised. Having a reliable and efficient payment method is essential for any business to grow. Thus, many businesses prefer to use cheques for business banking. 

Pros and cons of using cheques by businesses

Businesses have extensively used cheques for a long time. Let us understand the pros and cons of using cheques by businesses:


  • Safe: Anyone can’t just encash the cheque because of all the information mentioned in the cheque. The payer knows who the cheque is going to and whose bank it is expected to be encashed. Thus, we can say that cheques are fully traceable, making them a safer option for making payments. 
  • Trail: Cheques being in hard create a paper trail. You can check what was spent and where it was encashed. It helps to maintain updated records.
  • Gives flexibility: Cheques provide greater flexibility for making payments because everyone won’t accept electronic payments. 
  • Convenient: It is more convenient to carry than cash. It can be easily traced if lost. It is easy to keep a cheque securely in your bag and use it when required.
  • Involves float: Float time is the amount of time between the preparation of a cheque and its clearance. In many cases, this float time is for just one day. But, a company can earn interest during this time.


  • Can be returned or bounced for insufficient balance: Cheques can be refused. They do not facilitate immediate payment. They take time to clear. This is the main reason why the usage of cheques has fallen so rapidly.  
  • Fraud: Cheque frauds cover a sizable portion of all financial frauds. Writing a cheque is so simple. One can easily write fraudulent cheques from your organisation. It is tough to recover funds when money is obtained in this way.
  • Not a legal tender: It is not legal tender money, and hence cheques can be refused. 
  • Ensure finance: One must ensure proper balance in the bank account, or it may result in cheque bouncing, which may attract charges.
About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more


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