Voucher Check

Core Description

• A Voucher Check merges a negotiable payment instrument with a comprehensive, detachable remittance voucher, ensuring both payment and detailed accounting data are communicated together.
• This format enhances the audit trail, operational controls, and standardization of disbursements, benefiting organizations that seek greater transparency and compliance.
• Although adoption of electronic payments is increasing, Voucher Checks remain essential where precise documentation, fraud control, and reconciliation are organizational priorities.

Definition and Background

A Voucher Check is a special type of payment instrument commonly used by businesses, nonprofits, and government entities. It consists of two components: a negotiable check for the payment and a detachable voucher (remittance advice) that lists the details supporting the payment, such as invoice numbers, purchase order references, approval codes, amounts, tax, and discounts.

Historical Context

Voucher Checks have their origins in 19th century bookkeeping, where merchants began to attach remittance advice slips to payment drafts to help recipients reconcile incoming payments against pending invoices. The need for documentary accountability led to widespread adoption in large organizations by the early 20th century, especially as corporate auditing became standard practice.

Regulatory changes, including the Sarbanes-Oxley Act, United States Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), as well as rules governing public-sector expenditures, further established the relevance of Voucher Checks. Advances in technology enabled Enterprise Resource Planning (ERP) systems to support their issuance. Despite the emergence of electronic remittance systems, Voucher Checks are still widely used wherever paper documentation is required for legal, governance, or audit purposes.

Key Components

• Check face: Includes date, payee, monetary amount (both numeric and written), authorized signature(s), and banking information.
• Voucher stub(s): Lists detailed remittance data such as invoice references, GL accounts, amounts, discounts, and approval IDs.
• Detachable design: Perforated layout allows separation of check and voucher for filing and reconciliation.

Organizations often issue Voucher Checks for multi-invoice settlements, payroll distributions, supplier payments, and grant disbursements.

Calculation Methods and Applications

Calculation Methods

The calculation process for Voucher Checks focuses on the accurate aggregation and documentation of payments due. A typical workflow includes:

1. Invoice Aggregation: Accounts payable departments collect all approved invoices for a vendor or recipient.
2. Three-Way Match: Each invoice is cross-checked against purchase orders and receiving reports.
3. Coding: Financial and tax coding is applied (such as GL accounts, tax rates, project codes).
4. Voucher Preparation: Payment details, including discounts and credits, are recorded on the voucher stub.
5. Check Amount: The total of the voucher lines must reconcile exactly with the check face value.

Multi-Invoice Example (Hypothetical Case)

Suppose a United States construction firm needs to pay a subcontractor for three completed milestones. The accounts payable team aggregates the milestones (Invoices 101: USD 10,000; 102: USD 7,500; and 103: USD 12,000). An early-payment discount of USD 500 is applied to Invoice 102. The voucher check, therefore:

• Lists all three invoices, their amounts, and the discount applied
• Summarizes the total (USD 10,000 + USD 7,000 [after discount] + USD 12,000 = USD 29,000)
• The check face matches this total, providing a clear payment and audit trail

Applications

Voucher Checks are used across many sectors:

• Corporate Accounts Payable: Consolidate multiple invoice payments into one disbursement.
• Payroll: Issue checks with detailed earnings and deductions stubs.
• Grants and Nonprofits: Demonstrate adherence to donor or legal restrictions using line-by-line remittance.
• Government: Track appropriations, program codes, and compliance per disbursement.

Their use is prominent in environments requiring detailed reporting, such as public agencies, educational institutions, healthcare systems, and regulated industries.

Comparison, Advantages, and Common Misconceptions

Comparison with Other Payment Methods

Advantages of Voucher Checks

• Enhanced Audit Trail: Integrated remittance advice supports three-way matching and traceability.
• Dispute Reduction: Detailed descriptions facilitate reconciliation for both payer and recipient.
• Segregation of Duties: Built-in documentation supports compliance with internal controls.
• Multi-Invoice Settlement: Supports consolidation, which can lead to improved cost efficiency and reduced bank fees.
• Standardization: Establishes uniform filing and reporting frameworks.

Reported example: A United States nonprofit organization reported faster month-end closes and fewer audit adjustments after implementing systematic voucher check issuance.

Disadvantages

• Operational Cost: Paper printing, mailing, and storage increase costs compared to fully electronic payments.
• Processing Delays: Manual processing may slow payment cycles relative to ACH or wire options.
• Risk of Error: Manual data entry increases the opportunity for mistakes.
• Data Sensitivity: Stubs with excessive information could expose sensitive data if mishandled.
• Redundancy: ERP platforms often generate electronic remittance, making paper stubs partially duplicative.

Example: A United Kingdom retailer reduced costs after converting its supplier payments system from voucher checks to electronic payables.

Common Misconceptions

• Assuming that Voucher Checks are just regular checks with extra paperwork, rather than recognizing that the voucher serves as a vital control document.
• Discarding voucher stubs after issuance, which can compromise audit trails.
• Failing to match the amounts between the check and voucher, causing reconciliation issues.
• Overlooking the need for strict payee and invoice referencing for compliance.
• Neglecting dual approval and segregation of duties, which can weaken internal controls.

Practical Guide

Step-by-Step Guide to Issuing and Managing Voucher Checks

1. Vendor Validation and Invoice Matching
Verify the legal vendor name, address, and tax details against vendor records. Conduct a three-way match between invoice, purchase order, and receipt to confirm legitimacy and completeness.

2. Authorization and Approval
Route voucher creation and approval through a pre-defined approval process. Segregate tasks such as initiation, approval, and check signing to minimize fraud risk. For amounts above thresholds, require dual sign-off.

3. Prepare the Voucher
Document payment details, including:

• Payee and remit-to information
• Invoice numbers and amounts (including discounts and credits)
• Approval and coding fields (such as GL accounts, project codes)

4. Attach Support Documents
Compile relevant documents such as signed purchase orders, original invoices, and receiving proofs. Attach or cross-reference these to the voucher for a complete audit trail.

5. Print and Secure the Check
Use check stock with security features (such as watermark, MICR ink). Print all voucher details. Restrict access to check stock to authorized staff only.

6. Disbursement
Mail checks from a controlled environment. Do not allow requesters to pick up checks unless strictly logged. Share only necessary remittance details with payees.

7. Recordkeeping and Reconciliation
Post payments in accounts payable and cash ledgers promptly. Reconcile cleared checks monthly with voucher IDs and supporting documentation.

8. Handling Voids, Reissues, and Fraud
If a check is lost or erroneous, VOID it in both the check and voucher register, issue a stop-payment with the bank, and preserve all documentation for examination. Log root causes to prevent recurrence.

Case Study: Voucher Checks in a United States Municipality (Hypothetical Example)

A city government needs to pay a contractor for multiple milestones on a public works project. The accounts payable team prepares a Voucher Check that lists each milestone as a separate line item, referencing corresponding invoice numbers and contract terms. The check and attached voucher are mailed to the contractor.

• The contractor uses the voucher lines to update their accounts receivable accurately.
• During audit season, the municipality’s finance department can quickly match cleared check numbers to voucher stubs and underlying invoices, streamlining the verification process.
• This approach led to faster audit closures and decreased vendor disputes over payment allocations.

Resources for Learning and Improvement

• Professional Associations:

  • American Institute of Certified Public Accountants (AICPA): Guidance on disbursement cycles and documentation
  • Association of Finance Professionals (AFP): Glossaries and best practices for payments and remittance advice
  • The Institute of Internal Auditors (IIA): Sample audit programs and internal control frameworks

• Regulatory Standards and References:

  • United States FASB (such as ASC 305 for cash, ASC 720 for other expenses)
  • IFRS (IAS 1, IAS 7, IAS 37)
  • United States OCC and FDIC guidelines for check processing and retention
  • UCC Article 3 and 4 for negotiable instruments law

• Best Practice Publications:

  • FFIEC Retail Payment Systems Handbook
  • Auditor inspection reports (such as PCAOB)
  • ACFE’s Report to the Nations: Check fraud schemes and preventive strategies

• Templates and Tools:

  • Sample voucher check templates from accounting software providers
  • Remittance formatting guidance and record retention schedules from leading banks
  • Training glossaries from professional organizations

• Case Studies and Enforcement Reports:

  • United States and United Kingdom case analyses on voucher check control failures or successes
  • Public audit reports on payment documentation findings

FAQs

What is a Voucher Check?

A Voucher Check is a payment instrument that includes both a negotiable check and an attached, detachable voucher listing all supporting details of the payment, such as invoice numbers and account codes. This facilitates reconciliation and audit processes.

How does a Voucher Check differ from a standard check?

While a standard check typically only shows basic payment information, a Voucher Check includes detailed line-item remittance advice for multi-invoice settlements and a stronger audit trail.

Who uses Voucher Checks most frequently?

Voucher Checks are commonly used by accounts payable teams in businesses, nonprofits, government agencies, and other organizations that require rigorous documentation and audit trails for their payments.

What information is included in the voucher portion?

The voucher usually lists payee information, relevant invoices, general ledger codes, gross and net payment amounts, discounts, taxes, approvals, and additional notes for transparency.

Are Voucher Checks suitable for payroll?

Yes. Payroll Voucher Checks are common where employees need paper records. The voucher shows gross pay, taxes, deductions, and net pay, with the attached check serving as the payment.

Can accounting software generate Voucher Checks?

Most modern accounts payable and payroll software systems can generate Voucher Checks, auto-populating remittance fields, general ledger codes, and supporting positive pay and audit workflows.

How long should organizations retain Voucher Check records?

Voucher Check records should be kept in accordance with local regulations, often seven years or longer for public and nonprofit organizations.

What should be done if a Voucher Check is lost or fraudulent?

Initiate a stop payment with the bank immediately, void the check and voucher in internal records, and reissue the payment only after proper reconciliation and controls are completed. All steps should be documented for investigation.

Conclusion

Voucher Checks remain a relevant tool for organizations that require detailed documentation, efficient reconciliation, and adherence to audit and governance standards. By combining a payment instrument with comprehensive supporting records, Voucher Checks enable organizations to maintain clarity throughout the disbursement process, support dispute resolution, and facilitate efficient audits. Although electronic payments are becoming more common, Voucher Checks offer unique advantages in transparency, control, and auditability, supporting the needs of organizations where oversight and documentation are essential. For finance professionals, proficiency with Voucher Checks contributes to operational discipline, confidence in payment processes, and responsible management of organizational resources.