cheques are on the way out
It seems that we Irish are the most attached to our cheques out of all of our European neighbours (with the exception of France). We are hanging on for dear life to the trusted cheque book that has seen us pay our bills and settle our debts throughout the ages.
In fact, forms of cheques have been used since ancient times (at least the 9th century), but it was only during the 20th century that cheques became a popular method of paying for goods and services, without cash. By the second half of the 20th century, billions of cheques were issued annually with a peak around 1990. Since then, the cheque has been overtaken by more popular and more automated methods of payment, resulting in a steady decline of cheque usage in most countries.
The fact that we are lagging behind our European counterparts when it comes to electronic payments means that this has an impact on our cost competitiveness, security and consumer choice in Ireland.
Cheques are not cheap
In a recent survey carried out by the Central Bank, it found that we issued 84 million cheques in one year. Consumers accounted for 35% of the cheque usage with almost half for values of less than €100. Businesses made accounted for 44% of the overall total with SME’s making up 90% of the cheques.
From a small business perspective, I can see the attractiveness of using cheques. It is easy to do a cheque run, write out all the cheques and stick them in the post box. It’s not that expensive either, or is it?
Well actually, when you start adding it all up, it is certainly not cheap. An ECB study estimates that a cheque costs around €3.55 when all costs are included. That includes staff time, postage, stamp duty (50c per cheque), stationery. So, let’s say you are a small business doing your cheque run and paying 50 suppliers per month, that’s €177.50 per month or €2,130 per year spent on cheques.
Increasing efficiencies with electronic payments
According to the Central Bank of Ireland:
“The efficiency of Ireland’s payment systems infrastructure could be improved if greater use were made of secure and efficient electronic payments, leading to a reduction in the proportion of transactions involving cash and cheques”.
The National Payments Plan, which was launched in April 2013, has three main objectives:
1. Double the number of e-payments such as debit cards or electronic credit transfers by 2015, leading to a reduction in cash and cheque usage to the EU average.
2. Greatly improve the efficiency of the Irish cash cycle
3. Ensure the successful transition of retail electronic payments to SEPA
The monitoring and implementation of the plan will continue until the end of 2014.
e-day 19th September 2014
This is a great initiative as the particular focus of e-Day is to encourage SME’s to migrate from cheque usage as they are either issuers or receivers of more than 60% of cheques in Ireland. A shift away from cheques towards electronic as a preferred method of payment, will help small businesses reduce their costs and improve their cash flow.
It’s all making sense, so I think it is time to kiss goodbye to the cheque, forever.
Benefits of e-Payments
With E-Payments, you can:
- Easily create payment files to import into compatible banking software
- Make payments faster – no need to write out cheques and post them
- Pay accurately every time – no need to re-enter payments
- Control cash flow – when you initiate an electronic payment, you know precisely which day it will clear from your account.
- Avoids mistakes by reducing duplicate payments – only send the payments you want
- Organises your payment runs more effectively
- Keeps a record of your bank payments in your accounts software (assuming you are using SEPA compliant e-payments facility)
- Be secure – no need to have cash on premises and no lost or stolen cheques
- Credit Control – no more suppliers chasing for payments that have not been paid due to a cheque lost in the post
- Save time and money – processing payments electronically is nearly always cheaper than sending cheques and you don’t need to spend time traveling to your bank to lodge cheques. Sage research found that 19% of businesses visit the bank every day to lodge cheques. 33% say that it takes an hour or more for a member of staff to lodge cheques at the bank. Sage estimates that a small business sending and receiving just six cheques a week could save almost €5,000 by switching to e-payments.
- Expand your market – SEPA makes electronic transfers easier and cheaper within the 17 countries, which are currently participating in SEPA. This opens up new markets for your business, and as the costs of processing payments are now significantly lowers, the same as domestic payments, your business could start selling overseas to a larger audience.
- Introduce direct debits – get paid on time, reduce errors, increase cash flow
It is time to get your business ready to embrace the payments change. Click below to get your free step by step guide to help you embrace the payments change.