Why bounced Cheques mean bad business

Small businesses rely heavily on maintaining a good cash flow, with your customers pay on time. So when half of the United Kingdom are suffering poor small business cash flow that is bad news for small businesses.

Recent research shows that small, medium and large companies had many returned cheques. Micro-enterprises with fewer than 10 employees, have been less affected.

One way this can happen is when someone pays a business by cheque for goods or services. The deal pays him on your bench. The prudent business owner verifies that the check has cleared and writes new checks based on the money that's in the business bank account. Later it turns out that the check had not cleared at all and the owner of the company is now overdrawn and in debt. This means steep bank charges and makes it less likely that the company facilities will be extended in the future.

Understanding the Cheque clearing system most people know that a cheque takes anywhere from three to seven business days to clear. The date on which a cheque clears depends on: 1. the currency which your check is on. Pound sterling cheques in the United Kingdom clean faster than cheques in French francs, for example.
2. If the Bank that issued the check is from the same group of companies as the Bank the cheque being paid. Checks typically take longer to clean up when paid outside the banking group.
3. If the check is paid in one business day.

What most people don't know is that most banks ' Clean ' checks when the expiry of the normal compensation. This sometimes happens before the Bank has verified that the funds are available. The Bank provides for the withdrawal of the amount of the cheque, but he really didn't have cleared.

Some unscrupulous people can use this to your advantage. For example, they could pay with cheque for products or services, write the wrong amount on the check, ask for a refund and disappear with the money pit before the cheque clearing process is complete. When the original cheque bounces, is a small business that is left face an angry Bank Manager and a large Bill.

Payment assistance for enterprises, fortunately, there are other ways for businesses to receive money from their customers. The first is the banks Automated Clearing System (BACS). This is a secure system in which payments take only three days to clear. This system is commonly used to pay salary cheques directly to the employee's bank accounts.

A more expensive system (with rates around £ 25 per transaction) is the Clearing House Automated payment system (CHAPS). This system allows the same electronic money transfer day.

Business owners who are worried about being left with a big debt should consider getting their customers to pay for one of these systems, whenever possible. This will reduce high business cost of returned cheques.