Payable Through Draft

Firms, especially insurance companies, make a lot of their payments payable through draft. Payable through draft gives the payer-party more control over how the money is distributed, making it more ideal than a regular check or deposit.

Here’s how it works: say Bumble&Co needs to pay its employees, who work with bumblebees all over the world. Bumble&Co works with BoboBank. BoboBank creates the drafts on behalf of Bumble&Co. It sends the company the drafts, who then check their numbers to make sure everything (the signature and endorsement) looks good. Bumble&Co then gives BoboBank the okay to pay the drafts. BoboBank then takes money from the company account, paying the draft amounts to the Bumble&Co employees’ banks accounts, which could be in various banks all over the world.

Unlike a regular check, the company is responsible for verifying the legitimacy of the drafts rather than the bank. Plus, money is immediately withdrawn from the business account, skipping the regular check process that takes more time to move monies around.