How to Endorse A Business Check (and Common Mistakes to Avoid)

Even with so many paper processes getting cut out of day-to-day operations, paper checks remain common, and even critical, for most businesses today. That means knowing how to properly endorse a business check is highly relevant. After all , proper endorsement can help protect you from fraud and, at the ...

By Sydney C

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Even with so many paper processes getting cut out of day-to-day operations, paper checks remain common, and even critical, for most businesses today. That means knowing how to properly endorse a business check is highly relevant. Proper endorsement can help protect you from fraud and, at the very least, it allows you to avoid delays at the bank window. If you're unsure how you should do it, look at these common mistakes and the simple steps you have to follow.

how to endorse a business check
Make sure you endorse your business check property to avoid fraud and get your money quickly

Why You Need to Know and Use Endorsements

The number one reason you need to endorse a business check properly is simple: fraud. By endorsing business checks properly, you will better protect yourself and your company from fraud resulting from lost or stolen checks.

For instance, endorsing a check as "For Deposit Only" (FDO) ensures that, should the check get lost, no one else can cash it except you. Banks call this a restrictive endorsement and it tells the bank that it does not authorize them to deposit the check in anyone's account except for yours. The endorsement would preferably specify the account number, as in: "For Deposit Only, Routing: xxxxxxxxx, Account: xxxxxxx"

There are different restrictive endorsements, but they all serve the same purpose of preventing stolen deposits. When you use a restrictive endorsement on your check, it means you cannot pass it to a third-party for deposit.

Restrictive endorsements are of particular importance if you'll be mailing a check in for deposit or otherwise allowing it to leave your possession, putting it into a vulnerable state where it is more likely to get stolen.

You should note that you cannot undo a restrictive endorsement. Since banks stopped more than $17 billion in fraudulent transactions in 2016 alone, they take such endorsements seriously. If you place a restrictive endorsement on a check and then decide you want to pass it to a third-party, you must have the original issuer write a new check.

How to Endorse a Check Properly

The only person who can endorse a check for deposit is the payee listed on the front of the check. For instance, if you write a check to "John Doe," John Doe must be the one to endorse the check.

If more than one name exists on the check, banks may require all payees to endorse the check for deposit. For instance, if you make the check out to "John Doe and Susan Doe", both must sign. If you makes the check out to "John Doe or Susan Doe," only one must sign.

If it's a business check, any account holder can endorse the check and they need not sign their name. For instance, you can endorse it as: "For deposit only to account xxxxxxx". Once you know who must sign, you should figure out how to endorse the check for your situation.

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An example of a Restrictive Endorsement

There are five types of endorsements a payee can use:

  • Restrictive Endorsement: A restrictive endorsement, like "For Deposit Only" (FDO), limits who may cash the check. Banks will never ignore a restrictive endorsement.
  • Conditional Endorsement: A conditional endorsement restricts when/if a check can be cashed. For instance, if someone writes John Doe a check, John can endorse it as "Payable to Larry Smith upon satisfactory completion of bookkeeping services."
  • Special Endorsement: A special endorsement allows the payee to transfer a check to someone else. For instance, if someone writes John Doe a check, John can endorse it as "Pay to the order of Susan Doe" and Susan will be the one able to deposit it.
  • Blank Endorsement: A blank endorsement is the most common of all. This is where you sign your name as it appears on the front of the check. The issue is that someone could modify the check endorsement. For instance, a scammer could add a special endorsement making it payable to them.
  • Qualified Endorsement: A qualified endorsement limits the payee's responsibility should the bank return the check for any reason. Most institutions are weary of accepting a qualified endorsement, which may state "without recourse" next to the signature, as it prevents them from pursuing payment should the check bounce.

Of all the various endorsements, you will most likely use a restrictive endorsement the most. Others, like conditional and special endorsements, have some uses within a business, but one that you should never use is the blank endorsement.

At the time of endorsing a check, find out who will ultimately receive the money and endorse it accordingly. If you will cash the check for yourself, consider a restrictive FDO endorsement to prevent another person from taking the money. Likewise, if a third party with endorse the money, choose the correct special or conditional endorsement accordingly.

Common Mistakes to Avoid

Avoid these common mistakes and you'll be able to deposit any business check like a pro.

endorse a check
Many businesses still pay by check.  Be sure to endorse your check correctly for a smooth deposit.

Not Endorsing At All

Many people are in the bad habit of depositing checks that they have not endorsed. Banks often accept these checks if they are made payable to the account holder, however, it can lead to delays, fees, and even the check being rejected at a later date (even after you have received the money in your account). Always endorse a check and, when possible, use a restrictive endorsement to further protect yourself from fraud.

Ignoring Misspellings

If the person who wrote you the check spelled your name wrong, correct it when endorsing the check. Do so by writing the name, as they misspelled it, in the endorsement area with the correct spelling below it, then endorse as normal.

Incorrectly Addressing Mistakes

If you've ever made a mistake when writing or endorsing a check, it's important that you know how to address it properly. Keep in mind that you should always write using only a pen, not an erasable pencil. If you make a mistake, put one clear line through it and initial next to it.

Realize that it is up to the bank's discretion to cash a check with a mistake on it. If a check is beyond saving or if you have requested a replacement check, always write "VOID" across the front of the check so someone else cannot cash or misuse it at a later date.

Signing In The Wrong Place

The issuer should only sign the front of the check, but they may leave instructions on the back of the check. For instance, they might write: “Hold for deposit until December 30, 2019.” However, the bank may or may not follow these instructions when the check is cashed.

As the payee, always sign and endorse in the "Endorsement Area" on the back of the check. There may be a box available that allows you to further restrict how the check is cashed. For instance, banks like Capital One include a "Mobile Deposit Only" box, which you can check if you will be depositing through a mobile bank app. This prevents the check from being taken to a physical location to be cashed.

Prioritize Security

It may take a few times to get yourself in the habit of following these steps, but these steps are important for ensuring that fraudsters don't steal your business checks, or that your bank rejects your deposit. By prioritizing security, you can keep your company safe while enjoying a quick, worry-free deposit process wherever you are.

If you're in search of simple, easy solution to help with your check deposits, CheckDeposit.io offers businesses a quick, easy way to create and print check deposit slips and envelopes to mail them in.  Businesses can easily store a record of every deposit, check, and payee, and easily search download records.

About the Writer

sydney c

Sydney C began writing professionally in 2014 when she took on a full-time position as a non-fiction content creator and researcher. While her career enables her to explore variety of topics, FinTech is one industry that she is personally passionate about. As an entrepreneur herself, staying up-to-date with the latest in tools, practices, and business accounting is essential to managing her work. When she takes on projects for clients like CheckDeposit.io, she's able to weave that first-hand knowledge into the piece, making for more interesting and informative writing.