Time to rip up the cheque … for good!

21 Apr 2008

A company writing just 50 cheques a month could save €480 per year by switching to online payments, a technology cheques company said last week, backing up calls to move more Irish businesses in the direction of electronic payments.

The call to end the use of paper cheques by businesses followed a claim on Friday by the Irish Payment Services Organisation that Ireland is one of the most inefficient countries in Europe when it comes to electronic payments, with the continued reliance on cheques and cash costing the economy up to €1.4bn annually.

According to Martin Langedijk, managing director of Carlow-based online accountancy company Proact, writing cheques is similar to driving a horse and cart in modern day Ireland.

“Just think of the three costs: there’s the direct cost of writing cheques v electronic payments, the indirect cost of cheque payments in terms of bookkeeping time and complexity and finally, there’s cash flow planning.”

He said other indirect costs could mount, including the time it takes to record the cheques written into the bookkeeping system, bank reconciliation and possibility of error.

“Cheques cost Irish businesses thousands upon thousands of euro and they should be killed off as soon as possible as they have been in other economies, such as my native Netherlands,” Langedijk added.

He said his company is in the process of installing an online accountancy system for over 150 pharmacies in the Independent Pharmacy Ownership Scheme (IPOS), which will allow them to dispense with cheque-writing.

“Internet banking is the new driving force behind change in the accounting process. By fully embracing internet banking, minimising the use of cheques and using an accounts system that interfaces with internet banking, companies can reduce the time spent on bookkeeping by more than a third.

“Using cheque payments leads to an unpredictable cash flow. Payments through internet banking provide businesses with more control and visibility. The idea that cash flow can be improved by saying to suppliers ‘the cheque is on the way’ is no longer of this time.

“Using the [internet] bank statement as the source for your bookkeeping does away with the monster called bank reconciliation. Indeed Bank of Ireland’s own website says that its clients can save approximately 75pc on the cost of processing payments by moving to online banking.”

By John Kennedy