Every few years cheques are evaluated for their viability and durability in today’s society. Talk of phasing out cheques is often a headline. The UK Payments Council have paused this until confirmation that a suitable alternative has been found. With payment by card continuing to increase in popularity, businesses should consider the full scope of card payments, including as a method for improving cash flow.
Payment by card is more popular than ever. According to the 2014 annual report by the UK Cards Association, 90.5 million debt cards were in circulation in November 2013 – this is the highest on record. In addition to this, there were also 57.9 million credit and charge cards live. Online card spending had seen a 66.1% increase and thanks to improved regulations, online fraud had decreased by 23%. Card is a stalwart of UK financial processing, with popularity increasing as the industry continues to demonstrate improving security measures.
Cheques have many pros; for sole traders they can be invaluable and they are a trusted medium, particular for older generations. This is a key factor in keeping them in circulation. However, processing cheques can be a slow and arduous process. With cheques allowing many easy options for clients to avoid paying or reclaim the payment, processing a high volume of cheques can significantly reduce control over your business cash flow.
Waiting for the Promised Payment
The line “I’ll put a cheque in the post” often allows the payer a few days to
write the cheque, a few more for postal delivery and then 5 working days for the funds to be transferred. Therefore, it is often 10+ days from promise of postage to actual receipt of the money into your account. This is making the assumption that the promised action is implemented and that the cheque itself clears. When optimising and improving cash flow for your business, this is clearly an aspect to be tackled.
Having the option of receiving card payments has many benefits in tackling this scenario. Here are our top three reasons for accepting card to start improving cash flow for your business:
Firstly, it is available instantly. With OPL’s online system, the card payment can be processed straight away with the client on the telephone, through a link on your computer desktop. There is no waiting for the post, no paying-in books and no visits to the bank.
Secondly, there is immediate confirmation that the funds are available and that they will be transferred to your account. Where cheques can bounce or be cancelled during the processing period, once a card transaction has been confirmed, the funds will be ring-fenced ahead of movement to your account. This means that they cannot be spent elsewhere during the processing period.
Thirdly, card payments are usually settled within 48 hours. Sometimes, by speaking with a representative at your bank, this can be shortened further. So when a cheque can take 10 days or more, encouraging your clients to make their payments by card not only saves you valuable time in trips to the bank and manual processing, but the money arrives in to your bank in just 20% of the time!
So there are just a few reasons to consider moving customers away from cheques and towards card payments. If you’d like to find out about the other ways that using Online Payments Limited’s card processing systems can improve your administration do contact OPL and our team will be happy to discuss how our systems would work within your business.