In both personal life and business, one may be unable to meet their obligations. When you give authorization for someone to collect money on your behalf, you’re, in essence, delegating that responsibility to another party. In such a case, you must issue a letter/document indicating the said person is permitted to collect money on your behalf. The document must contain relevant information, including your relationship with the individual, names, and addresses of both parties and signatures. The letter must also include the date of authorization and the duration.
When is this type of authorization used?
Under certain circumstances, you may have no option but to authorize another person to collect money on your behalf. This may be due to sickness, workload, you going on holiday, traveling, or any other valid reasons. Under such circumstances, you must delegate your duties to someone you trust your juniors, family, or friends.
Other circumstances that may warrant you to authorize another person to collect money on your behalf include
- When collecting money from another company. If you have the responsibility to collect money from a company, but you are unable, you can delegate this duty to someone else.
- When collecting checks from a company or person, on your behalf. You may also permit another individual to collect checks from a company or a person if you can do it by yourself.
- Again, you may authorize a person to operate your bank account on your behalf if you can’t; this may be your spouse, your junior staff, or a colleague. In such circumstances, the bank will require a letter to effect the authorization for a limited period.
Alert: Every bank has it’s own internal process of authorizing a person to operate your bank account. A bank may require an authorization letter as one of many other required documents to complete this process. It is best to contact your bank for further information.
Things to include in your authorization letter
An authorization letter should contain the following details:
Date: At the top of your authorization letter, you should include the date of writing the letter.
Recipient’s information: After the date, indicate details about the recipient such as the name /company name, designation, address, etc.
Subject: Include a relevant subject on the letter such as “authorization to collect money on my behalf,” “Authorization to collect checks on my behalf,” “Authorization letter to claim money,” etc.
Salutation: Also, use the appropriate greeting in the authorization letter. Simple salutations you can use for your letter include dear sir, dear Mr. / Ms. / [name], dear madam, etc. If you don’t know the recipient, you can use “To Whom It May Concern.”
Reason: Indicate why you’re unable to collect the money yourself.
Beneficiary details: write the payee’s name and address in your letter. This should include the formal or passport name of the beneficiary.
Authorization details: write the formal name of the person you’re authorizing to collect money on your behalf. State clearly that you’ve approved the individual to receive money on your behalf. You should also include their SSN, passport, or ID card number in this section. Also, highlight your relationship with the authorized individual.
Period of authorization: Indicate specific dates in which the authorization will be valid.
Date of collection: This is the actual date when the individual will be collecting the money/checks
Additional information: Any other information that you may want the recipient to know should feature in this section. For example, you can request the recipient to send an SMS or email immediately after the authorized person collects the money.
Contact details: This includes the beneficiary’s address, phone numbers, and email address. Your details are essential for verification.
Letter closing: use polite letter closing, such as “thank you for your cooperation.”
Signature: Include your handwritten signature in the letter. If you have a company stamp, also include it in the letter.
When authorizing another individual to collect money on your behalf, you should follow the following precautions:
- Only authorize someone you fully trust.
- Ensure the duration of the authorization is clearly written in the letter.
- Only authorize the collection of checks that bear your name or your company’s name.
- Ensure the authorization document contains your contacts for verification.
- The authorization letter should bear your company letterhead.
- The authorization letter should have a valid company stamp.