Why Endorsement Is Essential

It is necessary thus to require the customer to endorse every cheque on another bank, whether payable to his order, payable to bearer, or however drawn. The endorsement shows from whom the cheque was received, it guarantees the correctness of the prior endorsements, if any, and holds the customer liable until the cheque is collected. It is desirable to have customers endorse also all cheques on the bank itself deposited by them. It serves the first two of the three purposes mentioned.

It is hardly necessary to put the cheques on other banks, received on deposit, through any particular register or book. The amount of each one is recorded, under the heading of the bank to which it belongs, in the teller's balance book, forming a part of his cash balance until cleared the next day.

In the case of cheques and sight drafts on outside points the requirements, as to being authorized by the manager, are somewhat stricter. In taking them the advance made by the bank is for a slightly longer term. The transaction, therefore, calls for something more in the way of judgment. The orthodox practice is for the customer to get them initialled by the manager before handing them to the teller. The manager may, and sometimes does, delegate the duty in part to the accountant in so far as it covers the taking of small items in the ordinary course of business from regular customers. Quite often, when the teller is an experienced man, his judgment fully relied upon by the manager, he is left practically free to take small items in the ordinary course, on other banks in town and on outside points as well.

Rates Of Commission To Be Paid

The items on outside points are called remittances, because they are remitted for collection or credit. In addition to the points mentioned as having to be considered in the case of the local cash items, there is another to be taken into account when dealing with remittances. It concerns the commission or exchange to be charged. That should properly be based on the length of time the bank will be out of its money and on the cost of making collection. In all probability there will be an understanding or arrangement with the regular customers as to the rates of commission they shall pay. It may be based on the varying circumstances of the customers' accounts. A bank that is properly run demands that every account on its books shall, in some way, be profitable.

The profit may come through the maintenance of a large balance on deposit, free of interest; through exchange or commissions, discount on loans, circulation of the bank's notes, or in other ways. It may happen that a man's account is, in itself, absolutely devoid of profit, but is worth while because of his control or influence over some other business or account that is profitable. These things all enter into the matter of establishing rates of commission on remittances received from the regular customers.

There are plenty of indications that competition between the banks for desirable accounts has resulted in many branches conducting their business in remittances at an actual loss. It has led them to take cheques and drafts on other points at rates which do not pay, and the accounts through which they are received do not in every case yield profits in any other manner to warrant their favorable rates on remittances.

So the teller is careful to mark on each remittance, lightly in pencil, the amount of the commission to be charged on it. The total of the commissions on all the remittances contained in any one deposit is to be deducted from the deposit or paid by the customer in cash.

When this is done and the items of the deposit found to be formal and correct in every particular, the deposit slip is initialled, entered on the credit side of the blotter under the heading, "Current Accounts," and handed out to the ledger-keeper for entering in the deposit ledger and the customer's pass-book.