Crediting And Remitting Proceeds

When bills are unpaid at maturity or refused acceptance on presentation, they are, as already explained, returned to the owners as soon as possible. When they are paid, the proceeds must be delivered to the owners immediately. The simplest method of accounting to the local owners of paid collections is to credit the proceeds to their accounts. From the total amount received for each bill, the amount of the commission, agreed upon as remuneration for the bank, is deducted, and the balance credited to the owner's account in the deposit or savings ledger.

In order that the bank can prove, if necessary, that it has accounted for the proceeds, and in order to enable the owner to identify the bill, the entry particularizes the collection number and the name of the promissor or acceptor. If the owner has no account in the ledgers, one is opened for him. It may be the beginning of a profitable connection, and if he withdraws the cash at once, he must do so by means of a cheque, which provides the bank with a complete receipt for the funds.

But a large part, perhaps the largest part, of the bills paid are received from banks in other places or from other branches of the bank. All that is necessary in settling with another branch is to credit it with such of its collections as are paid. As there would be nothing gained by the bank charging itself a commission, these items are credited at par. Settlement to other banks is made by draft, generally on one or other of the three settling centres, Montreal, Toronto, or Winnipeg.

The entries and slips for all the settlements emanate from the teller's box. To be treated as live documents, credit entries and requisition slips for drafts require to have his initial on them. The initial signifies that the bank has received an equivalent in cash, or contra entry for the credit it is about to accord.

Then it is the duty of one of the senior officers - the accountant or the manager at all but the largest branches - to check up the teller in his crediting and remitting for bills. At the close of the same day, or the beginning of the next, the checking officer is supposed to take the diary and follow the fate of every bill there recorded as being due. He must see and handle the bills said to be unpaid and held; he must see the originals or the copies of the letters enclosing unpaid bills returned; and he must check over the credits and remittances for the paid bills, satisfying himself that the latter have been forwarded duly to the rightful owners. The checking has for its objects the detection of dishonesty and the correction of mistakes.

Effect Of Competition On Collection Business

Formerly, the banks received better commissions for making collections than they now obtain. The charge for collecting for another bank generally was 1/8 per cent., with a minimum of 13 or 15 cents on each item. Sometimes a couple of banks would enter into a reciprocal arrangement and collect for each other at special rates or at par.

Rates and commissions were fairly uniform all over the country. The branch bank extension movement in the last ten years has effected a considerable change. When a new branch office is opened in a place that did not previously possess banking facilities there is nothing to be gained by cutting the regular rates, since all the chartered bank collections will come to it as a matter of course. But when there is a bank already in the field, it happens sometimes that both the newcomer and the older established bank make themselves rather ridiculous through their successive moves designed to gain or to keep the collection business of other banks.

It is not merely the commissions on the collections that are at stake. The banking office in a small town that holds and gets for presentation most of the drafts on the local merchants has with them somewhat of an added prestige. Sometimes good business can be diverted from older rivals through an adroit use of collections by a newcomer. Thus it happens occasionally that strenuous competition occurs in some little country towns between two local banks. The other banks in the cities and larger towns receive from the little places successive offers, each one bettering the other, of special rates for collections.