Announcements of the cheque’s imminent demise are premature. Over 500 million cheques were written during 2015, according to Payments UK. While there is still a year-on-year decline in the use of cheques, they are still a preferred payment method for many people.
For Financial Directors and executives, cash flow forecasting is a persistently vexing issue, and traditionally, cheque payments can mean trouble in this area. What are the implications, then, for credit control when a new image-based cheque clearing system is set to speed up the whole process?
The Cheque and Credit Clearing Company (C&CCC) manages the cheque clearing system. It has announced that a new clearing process is going live in October 2017 which will speed up how cheques are processed significantly.
“The new system means that if you pay in a cheque on a weekday, the funds will be available by the end of the following day,” explains Wendy Allen, of PCS Credit Management Limited. “This will make paying in a cheque a more attractive option, which then has implications for cash flow.”
This enhanced process will also mean a better interaction with technology, allowing some users to upload images of cheques via secure banking apps.
“It’s a recognition that while many people still opt for cheque payments, more should be done to improve how the system processes them,” Wendy observes.
Cash Flow Implications
Cheque payments have traditionally been a double-edged sword. On the one hand, they can mean a delay in receiving payment – the old excuse of “the cheque’s in the post” – but on the other, they provide a means for businesses to keep themselves in the black for longer periods.
“For those businesses with inherent cash flow challenges, such as recruiters, or the transport sector, cheques can mean headaches, but they can also be something of a lifeline”
Wendy Allen, PCS Credit Management
“If you’re faced with inflexibility in your outgoings, then keeping money in your account for longer feels more secure,” Wendy observes. “However, the long-term solution to cash flow issues is a more rigorous credit control system.”
“By working closely with Financial Directors, we know that cash flow forecasting is a high-ranking high priority for them. Anything that brings more clarity to this area is welcome”
Collecting money owed in a timely fashion will always be a central facet of sound credit control, and faster cheque processing should assist in this. But the complexities of credit control require continuous, consistent credit management.
If you would like to discuss options to improve your credit control: