Whether you are managing a large or small business, the use of business cheques is essential for smooth and well managed functioning of the business. The cheques play a very important role of not only transferring funds but also keep a record of the business activities. This record is available to every person who receives a business cheque. In case of an audit by an auditor or a third party the business owner will have to provide proof of the last 5 years of tax payments.
In most businesses the business cheques are paid in the month of April from the business bank account. However there are some businesses which pay cheques in May because the cashier is out of the office for a week. All business owners need to prepare business cheques at the end of the year. In most businesses the cashier prepares the business cheques as per the requirements of the business. The only difference between the normal business cheques and the cheques prepared by a cashier is that business cheques are deposited into the business account, while cheques prepared by cashiers are deposited in the account of the company.
For individuals who are running their business personally, they have to personally pay cheques to the suppliers/clients as per the terms and conditions of the contract. Business owners who are running their business on a business loan have to pay cheques to the business lender on behalf of the business. This aspect of paying business cheques is different from the accounts payable aspect of the business.
Most business firms have to pay cheques to the bank on behalf of the business and at the same time pay the tax on the amount. However, the tax on business cheques depends on the nature of business. The cheques received by the business firm will be accounts payable. When the accounts payable get accumulated then they can be audited. The auditor has to examine all the accounts payable reports and then arrive at his opinion whether the company has been paying the tax on time or not.
It is important that business cheques should be paid promptly because time lapse may result in further penalties. Business firms need to follow some rules and regulations regarding payment of cheques. It is essential to note that the cheques are payable to the business only. There are some exceptions when personal cheques are also paid, but this is very rare.
Most business owners prefer direct deposit so that their employees get the money straight away. This helps the employees to manage their own affairs better. The bank will send the cheque to the account of the employee can either withdraw it from the account or pay it to the payroll department. This makes things much easier for the business owner because he doesn't have to pay taxes on the money that has been deducted from the business profits.
Business cheques may sometimes become a burden if there are large payments due at the end of the month. In such cases, the business owner may use certain techniques to reduce the tax due. For instance, he may decide to pay cheques early. Pay cheques before they are due so that the tax payable does not become large.
Many business owners also try to save tax by not paying business casualty insurance premium at the end of the year. This includes travel insurance of any kind because these cover a wide range of risks, including injuries and death. Businesses should take care to find out whether they qualify for this reduction because there may be special conditions involved. Another way to lower the tax due is to increase the frequency of payments. However, this depends on the internal revenue policy of the particular business.