New legislation may just have made cheques a viable payment method once again. The proposed new system will see a drop in the time it takes to be cleared along with some new technological advances.
In this article, the Smart Team will explain what the new cheque for the late 2010s means for you and for businesses across the UK.
Cheques are still in popular use
In 2017, the UK saw approximately 477 million cheques being cleared – that’s the equivalent of every British adult sending just under 8 a year. This will come as a surprise to many as it’s often thought that cheques have fallen out of everyday use. However, the long-term story is still one of decline as in 2011, over 1.2 billion cheques were cashed.
Previously, MPs had considered completely phasing out cheques by summer 2018. However, backlash from charities and tradesmen forced them to take a U-turn on the issue.
Supermarkets haven’t accepted cheques as a form of payment for a long time now. This was one of the biggest reasons why cheques seem to have fallen out of favour. So why do so many people still use them? The answer stems from the fact that a cheque can be used to delay payments when they are used to settle an invoice.
The problems with the current system
Currently, it takes around six days for a payment to be processed via cheque. So, business owners attempting to delay a payment will use a cheque wherever possible. This gives them extra time to bring in money with which to pay the overdue invoice.
All of this feeds into what is known as “the late payment problem”. Half of businesses in the UK are receiving late payments on their issued invoices. The Cheque and Credit Clearing Company hopes that the new changes will help resolve this problem.
There are two main changes that will be introduced by the end of October 2018.
The first is that the six-day clearing period will be lowered to one day. This is a significant drop and is a step towards tackling the late payment problem. This will give otherwise suffering businesses a much-needed financial boost that they may have not got otherwise.
Secondly a new technology called “cheque imaging” will also be introduced to high-street banks.
What is cheque imaging?
Cheque imaging will allow you to send and receive cheques using the camera on your smartphone. This will eliminate the current need to travel to the bank in order to have a cheque cleared. Having to do this extra step was one of the major issues that stopped people from using cheques initially.
The Cheque and Credit Clearing Company chief executive, James Radford said: “…with the introduction of cheque imaging, we are bringing the cheque into the 21st century, ensuring that it remains a secure, robust, and viable payment method.”
Whether this will bring cheques back into daily use is yet to be seen. It is, however, a good start in tackling the UK’s rampant late payment issue.
We can help
If you would like some advice about how you can use cheques in your business, then get in touch with our team. We can also assist you in tackling any late invoice issues that you have. Call us today on 01202 577 500 or email us at email@example.com