What will you do when cheques are phased out in the UK?

What will you do when cheques are phased out in the UK?

If you regularly receive payment from your customers by cheque, then there are two important announcements that you need to be aware of:

2018 target date set for central cheque clearing closure

On 16th December 2009 the Payments Council Board has agreed to set a target date of 31st October 2018 to close cheque clearing in the UK.  Although cheque use has been in decline since 1990, and has fallen by 40% over the last five years, there are still plenty of situations where cheques are used extensively. These include payments between individuals, and payments to sole traders, small businesses, clubs, charities and schools.  The goal is to ensure that by 2018 there is no scenario where customers, individuals or businesses, still need to use a cheque.

Cheque card guarantee scheme to finish on 30th June 2011

To pave the way towards the cheque clearing closure, the cheque guarantee card will cease in June 2011 which means that cheques will no longer be useful for instant payments.

Direct Debit as a cheque replacement option

If your clients pay you at least once a year, then Direct Debit is a very attractive alternative to the cheque and can help you to:

• Cut down on administration - eg chasing clients for cheques, managing unpaid cheques
• Improve cash flow

 

• Cut down on late payments

 

• Provide a more professional service to your clients.

How should you choose a Direct Debit supplier?

There are many companies that can help you to set up and manage Direct Debits for your business so what should you look for when choosing the best bureau for your business?

Here are some things to look for:

• Your name must appear on customer bank statements – otherwise they may question the direct debit or even cancel it... causing your unnecessary administration work
• Funds should be cleared within 3 working days – the money is yours and should be made available to you as soon as possible after it has been cleared from your clients’ accounts
• No percentage charge – some bureaus charge a percentage of the total funds collected. This is fine if the total amount is small, but if you plan to grow your business, this could become very expensive. And remember, the more clients you have, the more expensive it is to change Direct Debit supplier – so it’s best to start with a company that will suit you when you are large
• Any report you like – as your use of Direct Debit grows, you will require more reports to help you make sure it is running efficiently
• Automatic re-present service – usually failed Direct Debits will go through if represented a few days later. Doing this automatically saves your administration cost and gets the money to you more quickly
• Client communication service -  if you change the amount you wish to collect, your supplier should be able to write to all affected clients for you to save your administration overhead
• Proactive management – you will be busy running your business and having a Direct Debit bureau who will spend time looking to make your collections more efficient and cost effective will really help
• Customer service – a good Direct Debit supplier will always be there to help you with any questions or issues you may have

FREE cheque replacement consultation

And finally, it is really important that your Direct Debit bureau is knowledgeable and helpful to make sure that you are fully aware of the best way to use Direct Debit  to replace cheques in your business. Look for companies that offer a FREE initial consultation such as Eazipay – www.eazipay.co.uk.