The chief economist at National Irish Bank has called on the Irish Government to set in stone an ‘E-Day’ for electronic payments – a bold move that would speed up payments to suppliers and save the Exchequer a fortune on the costs of writing cheques.
Leading economist Ronnie O’Toole warned that 78pc of the volume of payments in the Irish economy were by cheque at a time when businesses were closing due to customers failing to pay up on time. National Irish Bank is owned by Danish player Danske Bank and O’Toole says from what he has seen in Denmark, a move to e-payments would ignite the economy. "Among SMEs in Scandinavia, only one in six have cheque books and write less than six cheques a year. The advantage of electronic payment is simple – people get paid on time.”
As one of the biggest spenders in the Irish economy, O’Toole has called on the Government to target a specific ‘E-day’ when the State will start paying salaries and all suppliers electronically.
Such a move would save the Exchequer a fortune in terms of postage and the cost of issuing a cheque, typically between 15 and 20 cents.
He has also called on the State to make debit and credit cards a form of legal tender, which would encourage businesses to pay for goods and services on time, helping to end the vicious circle of late payments that are killing small businesses. Many firms wait typically between 60 and 75 days for payment, a lethal delay in the present economy.
He cited the UK Government where various departments and local authorities have implemented electronic payment and a rule of paying within 15 days.
“In Scandinavia, Finland and Sweden both experienced significant financial crises similar to Ireland in the 1990s,” O’Toole explained. “One of the measures that has strengthened their economies is fast e-invoicing and electronic payment. Firstly it’s cheaper to transact and often you are dealing with one person, not three. Sweden and Finland experienced their own financial crises; they learned and grew from it. They recognised the unnecessary costs of cheques and decided to break with tradition and habit.
“We need to Government to say that from 1 January 2011, for example, we will no longer be accepting any cheques and will issue payments electronically directly to bank accounts of individuals and businesses.
“Make it an E-Day and give people time to make the necessary adjustments. The reality is late payments can put firms out of business. If you think of all the hundreds of thousands of cheques issued every year and every single cheque costing up to 20 cents, the savings for the Exchequer would be substantial.”
By John Kennedy