When it comes to managing your business’s cash flow, the devil is in the details. 🔍That’s why it’s crucial for small business owners to know the differences between business checks and personal checks. 🤔
Separating your personal cash from your business’s funds is important for bookkeeping, payroll, and tax purposes. Whether you’re a sole proprietor with an online business or a local retailer, having a dedicated business checking account and savings account will help you stay on top of your finances and avoid costly mistakes.
In this article, we’ll shed some light on business checks vs. personal checks and discuss the differences between these types of checks. We’ll also cover:
What is a business check?
A business check is a payment method used to cover business expenses. Business checks are linked to business checking accounts while personal checks are linked to personal checking accounts and used to pay personal expenses.
Checks are a traditional payment method that’s commonly used by businesses of all sizes. But businesses can also use other payment methods like credit cards and business-to-business ACH payments to pay freelancers, operating costs, and other expenses. These modern options may offer more security and lower fraud risk than traditional business checks. 🌐
How do I get business checks?
You’ll need a business bank account to order business checks. Then, you can order business checks through your bank or financial institution.
When you order checkbooks for your business bank account, you’ll typically receive more checks than you would with a personal check order. Most financial institutions work with business check printers that offer customizable business check options. For example, you could add your company logo, watermark, or business name to the checks. However, keep in mind that business checks can be expensive to print. 🖨
Relay (that’s us! 👋) is an online business banking platform that offers several payment methods for small business owners. With Relay, you can send and receive business payments using wire transfers and ACH. You can also send check payments to vendors and employees when needed. 📝
What is a personal check?
A personal check is linked to an individual's personal checking account. Personal checks share many similarities with business checks. However personal checks may have lower deposit limits, fewer security features, and fewer customization options than business checks. 💰
Can I use personal checks for my business transactions?
Depending on how your business is set up, you may be able to use personal checks for business expenses. However, it’s always best to consult a tax adviser about your unique financial situation. Generally speaking, using personal checks for business expenses is not recommended.
Mixing personal and business finances can cause accounting issues and complicate your taxes. As a small business owner, it’s essential to have organized financial records and a clear picture of your cash flow. Using business checks for business purposes can help you separate your expenses and make sense of your financial health. 📊
How are business vs. personal checks used?
Business checks and personal checks share some similarities. Both types of checks typically feature:
The payee’s (the party making the payment) name
The payee’s account number
The bank’s routing number
The check number
A signature line
However, there are some key differences between business checks vs. personal checks.
Business checks
Business checks are linked to a business bank account. 🏦 These checks are used for business-related expenses. Businesses typically have higher expenses than individuals, so business checks tend to have higher deposit limits than personal checks.
Business owners may use business checks for things like:
Payroll expenses including employee paychecks
Operating expenses
Inventory and supplies
Marketing materials
Vendor payments
Tax payments
Personal checks
Your personal checks are linked to your personal checking accounts. These types of checks are used for personal expenses like utility bills, groceries, and rent. 🏠
Business owners shouldn’t pay business expenses with personal checks. Mixing personal finances with business finances can be a headache come tax season. Plus, personal checks may have lower deposit limits and fewer security features than business checks. 📑
Using personal checks for business transactions can blur the lines between personal and business finances. Separating your business funds from your personal funds can help you stay on budget and avoid overspending on both personal and business expenses. Plus, it can help you avoid making costly mistakes on your personal or business tax return.
Business checks vs. business ACH
While business checks have their place, business-to-business ACH transfers are often a safer and faster option for paying vendors, employees, and operating expenses.
This is because business checks can be expensive to print and process. Paper checks also pose more security and fraud risks than modern payment methods like credit card payments, wire transfers, and ACH transfers.
Plus, checks may take as many as 8 business days to process. These payment delays can affect your budget, cash flow, and vendor relationships. By contrast, business-to-business ACH transfers are a much faster and more secure payment method.
Digital payment solutions, like ACH transfers, can make it easier to manage your accounts payable. ACH transfers are sent through a secure payment network and completed entirely online. Because of this, they provide a clearer record of transactions than paper checks.
With Relay, small business owners can send free next-day ACH payments to vendors, contractors, and other team members. With Relay Pro, you can also send free same-day ACH payments and free international or domestic wire transfers. 🚀
Challenges of using business checks
Business checks are still widely accepted for business transactions. But modern payment solutions, like wire transfers, credit card payments, and ACH transfers are growing in popularity. These digital payment solutions can help overcome some of the challenges associated with business check payments.
Here are a few reasons your business may not want to use or accept business checks:
🔐 Security: Paper business checks pose greater risks than ACH and credit card payments. If your business checkbook is lost or stolen, your business can become vulnerable to fraud.
⏰ Time: Business checks come with slower processing times than digital payment methods. Checks can take several business days to clear, leaving your funds tied up with the bank. These delays can cause serious issues for your cash flow and negatively impact business operations.
💡 Effort: If you use paper checks, you may have to manually enter the payment information into your accounting system. Plus, you’ll need to track your check stubs and keep tabs on your payment processing times.
🛍 Vendor preference: Some vendors may prefer to receive business checks. However, others may prefer credit card payments, ACH payments, and wire transfers. That’s why it’s important for small businesses to have multiple options when paying vendors.
🤔 Flexibility: Business checks lack the convenience and flexibility of digital payments. If you make multiple check payments each week, you might have to make several trips to the bank or post office. Plus, it can take time for business checks to be printed and shipped to you.
Businesses with high transaction volumes or remote operations may prefer digital payment methods like ACH transfers. However, business checks can still be a practical payment method for certain vendors and transactions.
Using business checks vs. ACH for payroll
When it comes to payroll, small business owners have multiple options available. However, most employees prefer direct deposit paychecks over traditional paper checks. ACH payments are growing in popularity since these payments are more convenient, more secure, and cheaper to process than traditional paychecks. 💰
Business checks for payroll
Business checks provide a physical record of payment, which some employees may prefer. However, the process of writing, signing, and distributing checks can be time-consuming. Also, there’s always the risk of checks being lost, stolen, or altered.
Keep in mind that processing times can delay access to funds, which can cause issues for employees who rely on prompt payment. 😕
ACH for payroll
Employees, contractors, and freelancers may find payroll ACH and direct deposit more appealing than paper paychecks. ACH transactions are typically faster, more reliable, and less prone to errors than paper checks.
Digital payment methods offer extra layers of security for businesses and employees. ACH payments are less prone to fraud or theft. Plus, ACH transfers are easier to track than paper payment methods, which can save you lots of time on bookkeeping. ✅
Keep in mind that employees, contractors, and freelancers will need to consent to or opt out of ACH payments. Those who select ACH payments will need to provide their banking information. Some employees may not have access to a mobile device or computer, so they might prefer paper checks. Ultimately, it’s always a good idea to offer multiple payment methods for payroll.
Stay on top of your cash flow with Relay
Effective cash flow management is vital for the success of any business. That's where Relay can help. Relay is an online business and banking platform designed to help small businesses stay in control of their cash flow.
With Relay, you can send and receive next-day and same-day ACH, wire transfers, and yes—even business check payments. ✨ Plus, you can issue 50 virtual and physical debit cards, earn interest on business savings, and speed up bookkeeping with Relay’s QuickBooks and Xero integrations.
Ready to make the switch to Relay? You can sign up here. 😎
Banking Built for Business Owners
No account fees or minimums; 20 checking accounts; 2 savings accounts with 1.00%-3.00% APY; 50 virtual + physical debit cards. Open account 100% online.
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Banking Built for Business Owners
No account fees or minimums; 20 checking accounts; 2 savings accounts with 1.00%-3.00% APY; 50 virtual + physical debit cards. Open account 100% online.
Learn more
FAQs about business vs. personal checks
What is the difference between ACH payments and business checks?
ACH payments are electronic transfers made through a secure payment network. ⚡️Business checks are paper checks used to transfer funds from a business checking account. ACH payments are typically faster, more secure, cheaper to process, and easier to track than traditional business checks.
Are ACH payments more secure than business checks?
Yes, ACH payments are generally considered more secure than business checks. 🔐 ACH transfers are electronic, so it’s more difficult for these payments to be lost or stolen. ACH payments are also easier to track than paper checks, simplifying accounts payable reconciliation and bookkeeping.
Are ACH transfers more cost-effective than printing and mailing business checks?
Absolutely! The costs associated with printing, processing, and mailing business checks can add up over time. ACH payments eliminate these expenses while also providing faster payment processing. For example, you can send and receive next-day ACH payments for free with Relay, saving your small business time and money. 💰
How can I accept business checks?
Sending and receiving multiple payment methods can set your business up for success and help you expand your customer base. If you choose to accept business checks, you may want to explore modern deposit options. For example, most banks and financial institutions offer mobile check deposit services. 📲
