As an accountant, I have worked around the country with all kinds of businesses, large and small. I have worked for one of Scotland’s wholesale fresh meat suppliers and with one of the water services companies. I have worked with technology companies and more recently with a number of banks in customer-focused roles, so I have seen first-hand that controlling a company’s cash flow is one of the most critical components of success for any size of business. Research carried out by the C&CCC shows that nearly half of all businesses don’t mind how their customers pay them - just so long as they do get paid, and on time!
Many a profitable business on paper has ended up failing because they haven’t been able to manage and control their cash flow. Firms that don't exercise good cash management may not be able to make the investments needed to compete, or they may have to pay more to borrow money, simply to keep going.
So, this is why the current roll-out of a new image-based cheque clearing system, which will speed up cheque processing significantly, comes as a welcome boost to the millions of businesses that use cheques as a regular payment method. From the end of October 2017, banks and building societies started to roll-out this new process of clearing cheques.
The roll-out will be complete later this year, at which stage all cheques will be cleared to new, faster, next weekday timescales. Under the new system it means that if a business pays in a cheque on a weekday they will be able to withdraw the funds by 23.59 on the next weekday (excluding bank holidays) at the very latest. Some banks and building societies are likely to allow their customers access to the funds much earlier than this. This is great news for businesses.
However, it is important to know that when a cheque is cleared via the image-based system, not only will the recipient receive the money in their account more quickly; the money may also leave the account of the person or business that wrote the cheque to the faster timescale too.
As well as speed, cheque imaging is about providing more choice. Some banks and building societies may offer their business customers desktop scanners linked to their online bank account, allowing them to pay in any cheques that they receive more quickly than at present rather than having to go to a bank or Post Office to pay them in.
Using cheques as a payment method provides businesses with a number of additional benefits. They are seen as a safe, secure and trusted way of making payments. Our research shows that the average number of cheques written by businesses each month is five, whilst the average number of cheques received each month is nine. Three quarters of UK businesses said they had either made or received payments by cheque in the past month – proof, if proof were needed, that cheques are still very much at the heart of business life.
Part of my role at the C&CCC is to talk to the businesses that use cheques and explain to them how the new image clearing system will work. They tell me that one of the reasons why they like using cheques is the audit trail left by the cheque itself. Under the new system, a digital image of the cheque will be created, and it is this image, rather than the paper cheque itself, that will be exchanged electronically between the banks. The electronic data that is created will allow the business to store information more efficiently and will also provide a clear audit trail which will help the business with its reconciliations processes.
We know that another reason that businesses also use cheques is for ease and convenience. The only information that is needed by the payer is the payee’s name and address details. We know from our research that businesses use cheques in this way for paying out refunds to customers or for paying expenses to staff. Details of the recipient’s bank account are not needed, which for many companies speeds up the process
Cheques also provide businesses with the ability to control who in their organisation makes the payment. Businesses can set up control measures to only allow certain employees to sign cheques. Businesses also use pre-numbered cheques which allow the company to identify missing cheques immediately and take appropriate action where required.
Cheques have been around for over 350 years and, in 2017, over 400 million cheques were used for payments and to acquire cash across the UK. The changes to the cheque clearing process should help ensure that cheques are here to stay for as long as people want to use them.
This is great news for businesses!