“The cheque is in the post,” goes the old excuse. Payment by cheque is, for many, a headache. It feels slow, cumbersome, and increases the administrative burden. For many Financial Directors, cash forecasting is a concern overshadowing others, and cheque payments add an extra layer of unpredictability to it.
But will a new, image-based cheque clearing process, which will speed things up, help to make a difference?
The New Clearance System
The new cheque clearance system is due for initial implementation later in 2017, with a full roll-out the following year.
“There will also eventually be the option for customers to upload images of cheques through secure banking apps, should they wish to do so,” continues Wendy.
500m cheques were written in 2015, making it still a hugely popular means of payment despite year-on-year declines in use.
“For the moment, the cheque is here to stay,” Wendy observes. “But at least this initiative will drag cheques into the 21st century.”
Cheques and Credit Control
For many businesses, cheques traditionally mean a slower flow of money, both into and out of accounts.
“Recruitment agencies are a clear example of how cash flow can be a persistent issue. Anyone looking after a recruiter’s financial affairs will be familiar with the issue of inflexible outgoings combined with long waits for invoices to be paid”
Wendy sees how the new cheque clearance system has the potential to be both a help and hindrance.
“You might be waiting for payment by cheque, but at the same time, if you are having to make payments, doing it by cheque traditionally means money stays in your account for longer,” she observes.
Faster cheque clearance may cause disruption as much as it offers potential improvements in payment.
“The need for financial directors to implement and maintain sound credit management will always be pressing. Faster cheques are one aspect of credit control, but they are not a substitute for diligent debt collection and establishing processes that will work”
Planning is key, so that Financial Directors are aware of potential problems as early as possible, so that the right kind of credit management can tackle, alleviate, or eliminate them.
To discover how you can enhance your credit management: