Understanding Bills of Exchange and Checks

Posted on Mar 19, 2025 in Commercial and Financial Management

Bill of Exchange – Definition and Key Players

A bill of exchange is a document through which a person agrees to pay another person a certain amount of money on a specified date and at a specified venue. These letters and official documents are obtained from tobacconists.

In a bill of exchange, the following are involved:

  • The drawer – The person issuing the letter; the seller who is owed payment.
  • The drawee – The person liable for payment; the buyer.
  • The borrower – The person who has the letter in his possession; normally a bank.

The “call warrant” refers to the town where the bill is created, normally the address of the seller. The expiration of the letter is the day designated for payment. Accepting a letter means it is signed by the nominated person who must pay (the drawee), accepting all the terms appearing in it. Bills are paid and managed through banks. Therefore, the place where they will be paid will not be the drawee’s office, but the address of their bank branch.

CCC (Código Cuenta Cliente)

CCC (Account Client Code) is a number that serves to identify the current account. The first 4 digits correspond to each bank, the following 4 designate the office, the next 2 digits are called control digits, and the last 10 are the number of the bank account.

Complete Bill of Exchange

  1. Place of drawing – The location where the person who owes money resides, who has to collect the letter (the drawer).
  2. Currency – Euro (€).
  3. Amount – The amount of debt written in numbers, limited by brackets, for example: //5800//.
  4. The name of the person to collect the bill of exchange – The drawer.
  5. The day on which the Bill of Exchange is established.
  6. The day on which the bill of exchange has to be paid.
  7. The amount payable in the letter, written out – Limited front and back with a solid line.
  8. Bank data of the drawee.
  9. Number of the current account – From which the money will be given to pay the debt.
  10. Date and signature of the drawee – The person paying the bill of exchange signs, agreeing to all conditions.
  11. Data of the drawee – Or person who has to pay.
  12. Signature, name, and address of the drawee.

Endorsement of the Bill of Exchange

The endorsement of the bill of exchange, on the back of the letter, is a statement that is intended to guarantee payment. A person named the guarantor will assume payment of the letter provided that the person who had to pay (the drawee) did not. Therefore, a guaranteed letter provides more certainty of being paid than a letter with no guarantee.

  1. Name of the person or company being endorsed – The entity that has to pay the bill of exchange in the first place, usually the drawee.
  2. The date on which the guarantee is provided.
  3. Data of the guarantor – The person who will pay if the drawee does not.
  4. Signature of the guarantor.

Check

A check is a document issued by banks. It is a payment order by which the person issuing it (the drawer, the person who owes money) orders a credit institution (banks, savings banks), in which they have an open checking account, to pay a sum of money to a third party.

Checks can be issued in the following ways:

  1. Bearer – The check is paid to any person who submits it for collection.
  2. Nominative – The name of the person to be charged appears on the check.

A check should contain the following information: bank name, bank account number of the drawer, euro amount in numbers and in words, place and date of issue, and the signature of the drawer of the check (the person who issued the check).

Check Types

  1. Crossed Check – Identified by two parallel lines drawn from corner to corner. This type of check cannot be cashed directly; its amount must be credited to the account of the person collecting it.
  2. Certified Check – These checks are designed to be collected safely. The financial institution verifies that the drawer has sufficient funds in the checking account to pay. The check is blocked in such a way that it can only be used for payment. The bank stamps it as “compliant” and plasticizes the check to prevent tampering.