As one banking organisation celebrates the 350th anniversary of the cheque, another is deciding when to kill it off as a method of payment.
On Monday, 16 February 2009, the FPB attended a meeting at the Bank of England Museum, 350 years to the day since the first cheque was signed. It was organised by the Cheque and Credit Clearing Company, which has commemorated the occasion in a report charting the life and times of the preferred method of payment for small businesses. Amid the celebrations, the FPB is warning that the Payments Council is preparing a ‘roadmap' that is likely to decide when the cheque will be abolished.
The FPB was consulted over the Payment Council's National Payment Plan, in which it agreed not to phase out cheque payments until alternatives – including debit cards and automated payments, such as Direct Debits and standing orders – are made viable payment methods for small businesses. However, the FPB is concerned that setting a date for abolition would compromise this strategy.
"Even in a world filled with electronic telecommunications, many small businesses still rely on payment by cheque. Holding back the planned phase-out until viable alternatives are in place, and until businesses and consumers decide it is time to the withdraw the cheque-clearing service, would be the sensible approach," said Phil Orford, the FPB's Chief Executive. "The FPB is advising its members to explore alternatives, and calling on the Payments Council to help provide the information and support that is needed for a smooth transition."
In a survey by the FPB, almost three-quarters (73%) of respondents stated that ‘customer forces' should determine the rate at which payment by cheque be phased out. Further, nearly half of all respondents (48%) were concerned that removing cheque payments within the next seven years would harm their businesses.
According to the survey, respondents claimed to receive 72% of their payments from other businesses by cheque. More than half (55%) of the small businesses surveyed said they regularly pay other businesses – including suppliers, utilities companies and insurers – by cheque.
The Payments Council could play a key role in developing co-operative information-sharing agreements. This standardisation of messaging and invoicing would help businesses keep track of their financial responsibilities, as well as reducing the possibility of late payment.
D J Willrich Ltd is an audio visual and multimedia specialist, mainly working in museums and theme parks, which is based in Brockenhurst, Hampshire. Finance Director, Lynn Willrich, said that a smoother transition would help her to manage the firm's cash flow.
"It would be much better for us to work out ourselves when to go over to a system such as BACS, for example, rather than having a change forced on us," said Mrs Willrich. "Phasing it in more efficiently, using both cheques and BACS for a while, would help us to manage our cash flow. If you pay someone using BACS, you have to have cleared funds there and then, whereas with cheques you know you have a few days' leeway."