Cheque

Cheques are gradually being phased out but are a form of payment where the payee records the amount to pay on a cheque, signing it to authorise. This is presented to a bank who then collects the money from the payer's bank.

When is a cheque used? Cheques are mostly used to pay suppliers through the post.

Checks

• The date on the cheque is accurate.
• The amount written in words and figures agree.
• It has been signed
• The business being paid name is correct.

Issues

• Fraud - it's fairly easy to write a cheque when you don't have the funds in the account to pay for an item (by the times this is discovered and the cheque bounces it's too late for the retailer to do anything)
• Theft - cheque books are as valuable as cash so need to be secured.
• Cheques should not be signed until all the details have been completed, otherwise they can be used fraudulently

Payment timing - payment is made between 3 and 4 days of the cheque being deposited with a bank (this is known as the cheque clearing) but this timing can be delayed if a business doesn't cash cheques promptly which can cause cash flow issues. It's important to note that whilst a suppliers account may increase when a cheque is deposited, if the cheque doesn't clear the cheque can be rejected and the transaction reversed.

Discrepancies - To avoid discrepancies employees need to prepare cheques in accordance with an organisations policies and procedures, check them when they are received and banked, keep cheques secure and bank them regularly.

Note - cheques are only valid for six months after the issue date.