Check custody – What is it, definition and concept | 2022

Check custody consists of a financial institution receiving checks from its client in physical or electronic form. These are issued with a present date, but are scheduled to be collected at a later date. Thus, through this service, the client’s values ​​are safeguarded and their collection is managed.

In other words, check custody is a service offered by financial institutions for the purpose of managing and safeguarding the client’s check portfolio.

Once the check is cashed, the amount is immediately credited to the client’s checking account, allowing both the company and the client to have less of an operational burden. This, by dissociating the responsibility of being in charge of the collection of checks.

Undoubtedly, check custody is a highly requested service because checks continue to be widely used documents in the different exchange operations between companies and clients. Through this service, the financial institution saves and manages the checks that must be cashed in the future.

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Of course, this requires the bank to charge a commission to be able to safeguard the checks. In addition, other benefits can be added, such as being able to advance or delay the collection of the check by paying a rate established according to each banking institution.

Check Custody 1
Check custody
What is check custody?

What results does the company that uses the check custody service have?

Of course, it is not enough just to understand what check custody is, the most important thing is to understand that it offers very good results for the business. It especially simplifies financial management and guarantees the security of values.

Companies and clients, in general, use the check escrow service because they achieve the following results:

1. Superior Check Protection

In the first place, we must consider that, when the checks are in custody in a financial institution, the bank protects them in highly secure places. Sites can be physical such as the use of isolated safes or through secure computer systems.

Indeed, with this result, the company avoids the risk of theft or fraud of these documents because with these documents there can be deviations and internal fraud. Basically, there is a transfer of responsibilities to the bank, guaranteeing the security of these documents.

2. Increased productivity and efficiency

Secondly, the companies and businesses that contract this service work more efficiently, since, at the moment of having the check deposit guarantee, they do not have the need to manage other internal documents. This makes it possible to simplify the entire internal process.

Additionally, an increase in the level of productivity is achieved because the bank is responsible for making the discounts and the respective accreditations, avoiding that the collections are made too soon, affecting the issuer. Or too late affecting the company’s cash flow.

3. There is the possibility of an early discount

Thirdly, there may be the possibility that the financial institution offers the service of being able to anticipate the discount and make the corresponding accreditation. Companies can take advantage of this alternative, as long as they are willing to pay the corresponding fee. The benefit received is that the company has more money and helps improve its cash flow.

4. Less time processing information

Finally, with the help of electronic media, the time to learn and process information is reduced. This, since the banks have updated the status of each client and the information is handled in a useful and safe way for the company.

Naturally, the management of the portfolio of checks in custody is a highly changing and dynamic process. This, because movements are made continuously. That is why it is important to have a logical organization of the data that facilitates the operation of any business.

Check Custody 2.2
Check custody
What results are obtained?

Types of escrow checks

Among the types of checks in custody we find:

  • Checks in bank custody: Checks in bank custody are used to minimize the risk of the receipt and reduce the administrative burden. The company receives updated information through electronic banking.
  • Checks in notarial custody: For their part, notarial custody checks are used in the process of buying and selling real estate. In this case, the custody is done by the notary because the check can only be cashed until the agreed transfer has been executed. This transfer must be registered according to public requirements.

In conclusion, we can say that the check custody service can be very beneficial for any company or business. Especially for those companies and businesses that need to manage their check portfolio more efficiently, whether physical or electronic. In this way, they hand over this responsibility to the banking institution so that it saves, administers and manages the checks that must be cashed and credited at a future date.

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