The way cheques are being cleared is changing and could affect you and your business.
When bank customers pay cheques into their accounts, the process for the money to be cleared currently takes up to six working days. However, by the end of the year this will be possible in as little as 24 hours due to the new Cheque Imaging System.
How will the new system work?
The new Cheque Imaging System will follow these steps:
- Someone writes you a cheque which you then pay into your bank account as normal.
- Your bank carries out their security checks and then creates an image of that cheque.
- Your bank securely sends the image through the Image Clearing System. It is then checked by the bank who represent the person who wrote the cheque, for payment.
- Their bank carries out checks to ensure the cheque has not already been paid in and to confirm there are sufficient funds to pay.
- If checks are clear you will be able to use the money the next working day by 23:59 at the latest.
Receiving cheque payments: How does this impact me?
- Receive money faster – Quicker processing will mean you will receive money faster but you will need to ensure your customer has the funds ready for payment by the next working day.
- Take mobile payments – This could save you a trip to the bank as some banks will allow you to pay in an image of the cheque through your mobile banking app. Banks may also provide desktop scanners linked to online bank accounts – allowing you to pay in large amounts of cheques as digital images.
- Offering discounts for early payment? – An example where this could be an issue is if you offer a discount for a purchase before a specified date e.g. month end; and your buyer arranges for funds to be available at the beginning of the following month. This may now not be feasible and the funds will have to be ready earlier.
Making cheque payments: How does this impact me?
- Funds will leave your account quicker – Your funds could now be leaving your account much sooner than you expected. Therefore, cheques may not clear if you do not have sufficient funds ready in time.
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Award-winning chartered accountants offering tax, audit and advisory services.