1. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 1 Banking Services and Procedures Chapter 23

2. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 2 Introduction Financial transactions in the medical office nearly always involve banking services. The medical assistant may be in charge of financial responsibilities and must understand the procedure and reason for each transaction.

3. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 3 This chapter will examine:  How the Internet has changed banking practices  Four requirements of a negotiable instrument  Advantages of using debit cards  Three common types of bank accounts  Handing mistakes made in preparing checks  Precautions in accepting checks  Four kinds of endorsements  Actions to take when a check is returned  Reconciling a statement and making bank deposits

4. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 4 Banking in Today’s Business World  The Internet has changed the banking world.  Today, banking can be done in the privacy and comfort of home 24 hours a day by using either a computer or a telephone.

5. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 5 Online Banking Online banking is a means to perform banking services over the Internet. Also called:  personal computer banking  home banking  electronic banking  e-banking  Internet banking

6. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 6 Online Banking Services Online banking services include:  Checking account balances  Transferring funds between accounts  Paying bills electronically  Determining if a check or transaction has cleared the bank  Downloading account information  Viewing images of transactions  Applying for loans and trading stocks or mutual funds

7. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 7 Advantages of Online Banking  Ability to bank at one’s convenience  Ability to bank anywhere in the world  Saves time and expense  Comprehensive method of money management  Ease of use of online programs  Portability and availability

8. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 8 Disadvantages  Learning software  Less versatile than physical banking  Service options are somewhat limited  Possible slight risk in comparison to physical banking  Some fees charged for various online services

9. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 9 Online Loans  Becoming common  Available for almost everything—homes, cars, cosmetic surgery, dental work, student loans  Save the consumer time and money  Allow wider search for better rates  Usually faster processing time

10. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 10 Online Convenience  Convenience is the number one reason for using online banking services.  Online banking eliminates frenzied rushes to the bank during rush hour and standing in lines to make transactions.  Most online banking is available 24 hours a day, 7 days a week, 365 days a year.

11. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 11 Checks A check is a bank draft or order to pay a certain sum of money payable on demand to a specified person or entity. For a check to be negotiable, it must:  be written and signed by a maker.  contain a promise or order to pay a sum of money.  be payable on demand or at a fixed future date.  be payable to order or bearer.

12. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 12 Debit Cards  Debit cards are usually connected to a checking account.  Some are available by making a deposit online from a checking account, and then the debit card is used.  Pin numbers are assigned to the cards for cash withdrawal and point of sale (POS) purchases.  Most physician offices and medical facilities accept debit cards for payment in the facility and many are accepted online.

13. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 13 Types of Checks  Bank draft  a check drawn by a bank against funds deposited to its account in another bank  Cashier’s check  a bank’s own check drawn on itself and signed by an authorized official

14. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 14 Types of Checks  Certified check  the depositor’s own check that has been certified to be valid by an authorized official of the bank  Less common today, but available (customers often choose the cashier’s check option)  Limited check  can have limitations such as the amount or the number of days for which it can be cashed

15. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 15 Types of Checks  Money order  paper document that is purchased with cash and often used to mail money  Traveler’s check  used for traveling so that individuals do not have to carry large amounts of cash

16. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 16 Types of Checks  Voucher check  contains a detachable voucher form that itemizes discounts, payable amounts, or other information

17. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 17 The Banking System The Federal Reserve  Created by Congress in 1913 as the central bank of the United States  Consists of a seven-member Board of Governors nominated by the President and confirmed by the Senate  Headquarters in Washington, D.C.  12 reserve banks located in major U.S. cities

18. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 18 Federal Reserve Districts

19. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 19 American Bankers Association Number  ABA number is a part of a coding system  Appears in the upper right area of a printed check  Identifies the area where the bank on which the check is drawn is located and the particular bank within that area

20. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 20 How Checks Are Processed  Bank on which the check is drawn pays the sum of money specified on the check to the holder  Checks are turned over to a regional clearinghouse  Checks are settled by computerized entries

21. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 21 Magnetic Ink Character Recognition  Characters and numbers printed in magnetic ink are found at the bottom of checks.  Represent a common machine language, readable by machines and humans.  Amount of the check can be printed in magnetic ink.  Facilitates processing through high-speed machines that read the characters, sort the checks, and do the bookkeeping.

22. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 22 Common Types of Bank Accounts  Checking accounts  Savings accounts  Interest-bearing accounts  Money market savings accounts  Individual retirement accounts  Business accounts

23. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 23 What to Look for in a Business Account  Online banking  Business checking with interest, accruing interest with either checking or savings accounts  Free checks and deposits, with a maintained minimum balance  Overdraft protection

24. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 24 Perks for Businesses  Business express  “Sweep” account  Business checking with special features  Cash management account  Other special features that vary from bank to bank

25. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 25 Business Checks  Business checks are usually larger in size than personal checks.  They may be bound three to a page.  Computer generated checks are popular today.  One-check writing is similar to a pegboard accounting system.

26. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 26 Business Checks (cont’d) From Hunt SA: Fundamentals of medical assisting, Philadelphia, 2002, Saunders.

27. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 27 Bill-Paying System  Establish a bill-paying system in the office.  Pay bills at designated times.  Pay bills at times to maximize money.  Use automatic withdrawals and deductions.  Use online bill paying.

28. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 28 Writing Checks

29. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 29 Checkbook Stubs  Fill out the checkbook stub before writing the check.  Make certain the stub is completed so that all checks are tracked.  Fill out a checkbook stub when paying a bill online.

30. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 30 Checkbook Stubs (cont’d)

31. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 31 Signing Checks  Never sign a check until it is time to use it.  Some physicians allow a designated person to be on bank accounts and sign checks.  Other physicians want to sign all checks themselves.

32. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 32 Cancelled Checks vs. Bank Statements  Many banks have stopped sending the actual cancelled checks with monthly bank statements.  All transactions are available on the bank statement.  Most banks keep a scanned copy of the front of the check online, which can be printed from the office computer if needed to prove payment.  A copy of the back of the check is usually available from the bank if needed to prove if it was cashed and who cashed it.

33. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 33 Handling Corrections  Do not cross out, erase, or change any part of a check.  Erasures are easily noticeable.  Banks have the right to refuse to pay suspicious checks.  If a mistake is made, write VOID on the check and write a new one.  Keep voided checks with cancelled checks or bank statements.

34. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 34 Writing Cash Checks  Make the check payable to “cash” or “bearer.”  Never write this type of check until ready to cash it.  Often used to replenish petty cash or replenish the cash drawer for making change.  Some banks require an endorsement on the back to cash this type of check.

35. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 35 Mailing Checks Checks should never be visible through the envelope unless the check is a computer- generated one that shows the address through a window envelope.

36. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 36 Special Problems with Checks Overdrafts  A check that the bank covers and pays, whether or not a fee is charged Overdraws  A check written for more than is on deposit in the account  Banks may refuse to honor the check

37. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 37 Special Problems with Checks Stop payments  A depositor can rescind a check by placing a stop payment order on the check.  Stop payments can often be done online and may be associated with a fee. Reasons for stop payments:  Loss of a check  Disagreement about a purchase  Disagreement about a payment

38. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 38 Guidelines for Accepting Checks

39. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 39 Minimizing Check Fraud  Ask the bank to advise the office when new checks are ready and physically pick them up.  Make sure cancelled checks are kept in a secure area, and never throw them in the trash.  Check bank statements immediately on receiving them.

40. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 40 Minimizing Check Fraud  Reconcile the bank statement immediately.  Print a return address on an envelope.  Do not discard credit card records or bills with trash.

41. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 41 Acknowledging Payment in Full If payment in full is noted on the back of the check above the endorsement, it must be accepted as payment in full if the payee accepts and cashes the check. Endorsement Disclaimer “This check is deposited under protest, without prejudice, and with preservation of all rights of the payee against the drawer of this check, according to UCC § 1-207.”

42. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 42 Returned Checks  NSF: Non-sufficient funds. Most businesses charge between $10 and $35 for returned non-sufficient funds checks. Some states place limits on the fee amount.  Contact the maker of the check quickly by telephone.  Redeposit manually or electronically.

43. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 43 Returned Checks  If unable to collect the check, turn it over to law enforcement or take civil action against the maker.  It is against the law to write a check when funds are not available to cover the purchase. This is called “theft by check.”  Most returned checks can be filed with the county attorney’s office and the maker can be arrested for writing a “hot check.”

44. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 44 Check Endorsements  An endorsement is a signature by which the endorser transfers all rights in the check to another party.  Endorsements must be made in ink, using pen or rubber stamp.  When accepting checks as payment, either in person or through mail, immediately stamp the “for deposit only” check endorsement.

45. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 45 Types of Endorsements Four principal kinds of endorsements:  Blank endorsement  Restrictive endorsement  Special endorsement  Qualified endorsement

46. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 46 Methods of Endorsement  Stamp  Signature

47. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 47 Making Deposits Deposit checks quickly for these reasons:  Stop-payment orders may be issued.  Checks may be lost, misplaced, or stolen.  Delay may cause the check to be returned for NSF.  Checks may have a restricted time for cashing.  Depositing quickly is a courtesy to the maker.

48. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 48 Preparing the Deposit  List all checks on the back of the deposit slip.  Transfer the total to the front of the slip.  Enter the amount of the total deposit on the deposit slip stub.  Add the deposit amount to the checking account balance.

49. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 49 Deposits by Mail Deposits by mail save time and are easy to make if only checks are involved. Physicians often deposit by mail if their bank is in another city or state. This may happen if the bank is offering a higher interest rate on checking/savings accounts and is not uncommon.

50. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 50 Direct Deposits Direct deposit is a plan in which payments are transferred, usually electronically, by a paying agency directly to a checking or savings account.

51. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 51 Remote Deposit Capture  Many banks offer business customers the remote deposit capture option.  A unit that is connected to the computer scans the bottom portion of checks, containing the routing and account numbers.  Once scanned, the check is electronically deposited into the business account.  Some units allow the business to immediately return the check to the maker as a receipt of payment.

52. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 52 Remote Deposit Capture

53. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 53 Bank Statements Bank statements show:  Beginning balance  Deposits received  Checks paid  Debits paid  Bank charges  Ending balance

54. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 54 Online Statements Online statements allow the user to:  receive statements quickly and easily.  save statements in electronic form.  lower fees by minimizing mailing and paper costs. Note: Reconcile bank statements immediately on receipt.

55. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 55 Signature Cards  Banks will require that any person who is allowed to write checks on an account fill out a signature card and show proper identification.  The bank should verify any questionable signatures.

56. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 56 Bonding Fidelity bonds help the physician to protect from financial loss through embezzlement or theft by employees who handle large sums of money. Bonding usually requires a personal and criminal background check. Types of Bonding include:  Position-schedule bonding  Blanket-position bonding  Personal bonding

57. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 57 Summary of Scenario  Explore online banking and learn about the latest services offered by financial institutions.  Set goals and complete assignments each day, staying ahead and getting deposits in on time daily.  Know your bank and the services it offers clients.

58. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 58 Closing Comments  The medical assistant must examine payments and make certain checks are filled out appropriately.  Contact patients who write NSF checks quickly and attempt to resolve the issue.  Endorse checks with the “for deposit only” stamp.  Make daily deposits.  Always be courteous when interacting with patients about financial issues.