Banks are one of the most regulated financial institutions around the world. The banking sector needs to ensure that all its customers comply with regulatory requirements. Compliance is very important and central banks and other global watchdogs provide stringent oversight.
- Deposit Slip
- Debit Card
- Credit Report
- Bank Statement
- Loan agreement form
- Letter of Credit (DLC)
- Bank Pre-Advice
- Bank Guarantee (BG)
- Bank Note
Every business needs to know and understand the preparation of accounting documents like the balance sheet and income statement. In terms of documents, any accountant will tell you how important receipts or invoices are. What about the documents used in banking?
Like in accounting, there are several documents that one might not miss on if they were dealing with a bank. Here we list some of these tools.
1. Deposit Slip
The deposit slip is a common banking document that anyone depositing cash into an account will need. It is a form on which the depositor indicates the date of the transaction, the depositor’s name, account number, and amount deposited.
Here are the benefits of deposit slips:
- Bank records: Banks rely on deposit slips to maintain a ledger of deposited funds
- Proof of deposit: The customer can also use it as proof that the bank received the funds if the deposit was incorrectly counted.
- Provides useful details: The slip contains the depositor’s name, the date, the depositor’s account number, and the amount
2. Debit Card
Banks issue debit cards to account holders. The card helps the individual gain access to their money electronically. Most people use debit cards to withdraw money from automated teller machines (ATMs) or to pay for goods or services at shopping malls and other point-of-sale locations. The debit card allows for debit or credit transactions on an individual’s account.
Unlike credit cards, debit cards protect you from going into debt. However, in a few cases, you may incur a small debt if you signed up for overdraft protection. But the negative balance is usually incredibly small. The fact that debit cards typically have daily purchase limits also ensures you cannot spend too much money with the card within a short time.
3. Credit Report
This is a detailed report showing the credit history of an individual. Banks rely on these reports to determine credit worthiness of anyone seeking a loan facility.
Credit reports are typically divided into the following 4 sections:
The first section contains the customer’s personal information. In some cases, you may also find variations of the client’s Social Security number or name. This happens if a lender or another entity incorrectly reported the information.
After the top section, you find precise details on lines of credit. The tradelines or lines of trade often form the bulk of the report.
This is where public records typically appear. If there are issues on judgments, tax liens, and bankruptcies, you find them here.
You find the entities that recently requested to see the report for any reason at the bottom of a credit report. For example, when you apply for personal loans, the records appear here.
Another document closely related to the credit report is a Soft Probe.
4. Bank Statement
The bank statement is a financial document used in the banking sector to show a summary of account transactions. The document is usually prepared every month and takes into account transaction details in a deposit or a credit card account. The statement contains particulars such as date, type of transaction, amounts involved, and the balances.
Bank statements are incredibly useful documents for any business or individual. You can use the document in the following ways:
- Check your bank balance and reconcile your accounts
- Identify errors or fraudulent activities
- Track your income and expenditure
- Get to know your net worth
- Help you to document your finances
5. Loan agreement form
The Loan Agreement form is one of the most commonly used documents in the banking sector. Whenever one needs to apply for a loan, the bank will provide the loan agreement form to be filled by the borrower and verified by the lender. A bank will rely on other documents to establish the creditworthiness of the borrower.
6. Letter of Credit (DLC)
Banks use a letter of credit as a financial document that stipulates what documents a party needs to provide for payment to occur. The DLC also ensures the payment occurs as indicated and through SWIFT.
7. Bank Pre-Advice
The Pre-Advice document is used by banks to offer advice and as a request to open financial instruments on behalf of customers in this or that bank. It involves two banks, with the recipient bank expected to acknowledge and accept the advice before the asking bank proceeds to facilitate the said financial instrument.
A check, also cheque, is a document most used within the banking sector. A written check will instruct a bank or other such financial institution to pay the indicated amount of money. The amount is paid from the drawer’s account to the person named on the check or the bearer.
Many people still use check in the digital era since they are:
- Safer to mail
- Cannot be used by criminals
- Not deposited immediately
- People who have no bank account can still cash checks
- Make budgeting easier
Despite the safety and convenience that checks offer, you need to mitigate risks if you have a personal checkbook. Keep it safe and be sure you have adequate cash in your account to cover the checks you write.
9. Bank Guarantee (BG)
Another common document is the Bank Guarantee. Banks use this financial instrument to indicate that the bank is ready to make a full payment once the target party meets certain conditions as set out in a Sale and Purchase Agreement (SPA). Anyone with a BG document can borrow money or access credit against it.
10. Bank Note
This is a banking document that people also call as a “bill”. It is a negotiable promissory note, which a bank issue, and whose usage is broadly similar to what we call money or legal tender.
Banks and other financial institutions lead the way when it comes to automation, meaning digitization could transform how we access and use some of these documents. Meantime, however, these are some of the top documents used in banking.