Wednesday, 25 November 2015

Are Cheques Still Relevant?

After peaking in the mid-80s, cheque use has been steadily declining. According to a report by the Australian Payments Clearing Association (APCA), the use of cheques has declined over 70% in the last decade.

With so many voluntarily adopting the use of debit and credit cards, as well as other means of electronic transfer for payment, some have begun to wonder if cheques are destined to share the same fate as Australia's Holey Dollars and one and two cent coins.

Disadvantages of Cheque Payments

Opponents of cheques cite the relative security of electronic transfers, and their speed and ease of use as reasons to stop accepting cheques as a form of payment. Most electronic debits and credits happen instantly, whereas it can take 3 or more days for a physical cheque to clear one's bank. It also costs banks about three and a half times more to process a physical cheque than an electronic transfer. The recipient also often has to go to the time and trouble of physically visiting their bank to deposit the cheque.

Even though less than 5% of all the payments made by individuals and businesses each day are made by cheque, this percentage still amounts to a large number of transactions. Almost one million of the payments that are made each day in Australia are made by cheque. As long as there is a need for cheques, it is unlikely that governing bodies will take legal action that would officially end their use.

Groups Still Clinging to Their Cheques

Even though it's unlikely that there will be an official "hard stop" for accepting cheques as a payment method, time itself may make the question a moot point. Most cheque users tend to be older in age, with less than 7% of those under the age of 30 using them.  As the population naturally ages, cheque use will continue to decline.

While older folks prefer to continue using cheques for nostalgia's sake, insurance proceeds, real estate sales, superannuation payments, and even property settlements are often paid by cheque for legal reasons.  Charities, sporting clubs and other non-profits also often prefer to use cheques since they believe it allows the group's treasurer greater control over the organisation's funds.

Why it's a Good Idea to Expand Payment Methods

While it's unlikely that cheques will be outlawed in the near future, many vendors, suppliers and customers may stop accepting them on their own. This fact alone makes it a good idea for the treasurer and other board members to investigate what steps are needed to start making and accepting electronic payments.

While it's likely that cheque use will still exist for some time to come, expanding the types of payment methods that your non-profit makes and accepts  will give your group greater flexibility with vendors and suppliers as well as decrease the time that it takes for funds to be processed and available for use.