Pay order is an instrument that a banker issues after receiving funds from customer hence the payee assured of receiving the funds on presenting PO. Pay order is also known as banker’s cheque because it is issued by a bank and payable locally only. This means that you cannot issue a pay order to a customer who is out side of your city. Only Demand draft can be issued across the city. Also PO cannot be issued against cash Rs 50000.00, and pay order above 50000.00 can be issued through account only.
Now how will you write a cheque for taking a PO through account? The cheque should be favoring “Yourselves for PO favoring XYZ Pvt Ltd” and cheque should be including service charge and PO amount. If cheque is only for PO amount your account will be debited for service charges.
The main feature of a pay order is that it is an assured payment. There is no risk of retuning cheque due to insufficiency of fund, technical errors. It helps to avoid the risk of cash handling etc.
Procedure for issuing Bankers cheque or PO
- Filling up and signing the requisition slip.
- Paying amount to the counter
- Cashier will scrutinize your request
- He will enter transaction in their system by debiting cash in case you are paying cash and your account in case you are giving a cheque.
- Next step is printing of PO
- Printed PO will be sent to Customer service manager along with requisition slip. The CSM will sign after verification.
- Two authorities should sign in case of PO above 25000.00