Is getting rid of cheques one way to tackle the problem of late payment among British business?
The British Chambers of Commerce (BCC) certainly thinks so – a new report from the body recommends that the UK Payments Council looks again at its decision to cancel a 2018 deadline for scrapping the payment method.
A survey of more than 5,000 firms by the BCC shows 94 per cent are affected by late-paying customers with a quarter saying at least 40 per cent of their invoices have been settled late.
Last year, I remember something of a mini-furore over the UK Payments Council’s (the regulatory body for payment services in the UK) plan to axe cheques by 2018.
The council bowed to pressure from business groups and cancelled the decision, but now the BCC is urging it to “reassess the case” for phasing out the cheque.
“While many businesses still use this method of payment, it can have negative effects on other businesses’ cashflow,” the BCC said in a statement.
BCC research has found more than two-thirds of businesses are typically paid by cheque – however, only a fifth cite it as their preferred method of payment.
The business group has also set out a number of other measures it thinks will help tackle the late payment problem and start to get cashflow moving.
Bringing in a ‘kitemark’ scheme to promote prompt payments: This would see businesses formally acknowledged as prompt payers.
Encouraging payments in preferred payment methods: Companies could consider offering concessions to those customers using their preferred method.
Having all public sector organisations use electronic invoicing: The BCC says that if e-invoicing was introduced across all areas of the public sector, businesses could benefit from invoice discounting platforms, and improve cashflow.
I think any move to tackle cashflow should be welcomed, but I’m not sure if getting rid of the cheque is the main answer.
In my experience lots of businesses still use cheques as their primary payment method. Phasing them out could create more trouble than it’s worth as firms are forced to overhaul their payment systems.
I’m a lot keener on the BCC’s recommendation that firms offer concessions to customers using their preferred payment method.
And what about discounts for early payment? Sure, many companies are cash-strapped, but even a modest discount could ensure suppliers pay up early.
However, bringing new measures in alone will not wholly deal with the issue. The onus must also be on firms to ensure they put suitable measures in place to help themselves.
But what do you think?
Posted by the Secret Businessman