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What does "Account Payee" Mean?

By Osmand Vitez
Updated Feb 23, 2024
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An account payee is the individual or company to whom a check is made. A typical check contains information on the payer or account holder, the amount to be paid and reason for payment, and the name of the individual or company receiving the funds. When the account payee receives a check, she endorses, or signs, it and then takes it to a bank or other financial institution to cash or deposit the check into her own account.

Checks are payment instruments that are typically more secure than cash. Additionally, businesses can electronically print checks and send them through the mail. This helps the company improve its float, which is the time between sending a check for payment and receiving funds for goods or services sold on account. Modern banking technology cuts down significantly on float time. Once a bank receives a check, it will typically initiate an electronic transfer of funds from the payer to the account payee rather than sending the physical check to request payment. The check will go to the payer's bank after the transfer takes place.

It is possible for checks to be negotiable or non-negotiable. With negotiable check instruments, the account payee can simply endorse the check to another party, which allows for more options when receiving checks as payments. Payers may not be willing to have this happen to their checks, however, so the payer can indicate that the check is non-negotiable and is only for the individual receiving funds. This will prevent the check from changing hands multiple times, reducing the risk of fraud or theft. This also ensures the check will go through the banking system in a timely manner. Uncashed checks are typically difficult to follow, especially with companies that process large amounts of checks on a monthly basis.

In business, most information technology applications provide an accounts payable module for printing checks. Companies generally purchase blank checks from a vendor. Vendors have specific paper for business checks that include security features such as watermarks, specific coloring or patterns, and special perforations. Each feature helps prevent an account payee or unauthorized individual from creating a fraudulent check or making alterations to secure more funds than the printed amount on the check.

For further protection, companies can have various phrases printed on their checks that create restrictions for payment. Typical restrictions can include non-transferability or a time limit for cashing the check. The account payee must follow these guidelines or lose the payment.

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