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Tiny companies rely heavily on preserving a excellent money flow and possessing their customers pay on time. So when half of the UK's small companies are suffering from poor cash flow that is undesirable news for modest companies.
Recent analysis shows that small, medium and huge firms have had several bounced cheques. Micro businesses, with much less than 10 employees, have been much less affected.
A single way in which this can occur is when a person pays a company by cheque for goods or services. The company pays it into their bank. The prudent business owner checks that the cheque has cleared and writes out new cheques based on the money that is in the enterprise bank account. It later turns out that the cheque hadn't cleared at all and the business owner is now overdrawn and in debt. This means steep bank charges and makes it much less likely that company facilities will be extended in the future.
Understanding The Cheque Clearing Technique
Most men and women know that a cheque takes anyplace from three to seven operating days to clear. The date that a cheque clears depends on:
1. The currency that the cheque is in. Sterling cheques in the UK clear a lot more rapidly than cheques in French francs, for example.
2. No matter whether the bank that has issued the cheque is in the same group of organizations as the bank the cheque is getting paid into. Cheques usually take longer to clear when paid outside the banking group.
3. Whether or not the cheque is paid in on a organization day.
What most people do not know is that most banks 'clear' cheques when the normal clearing period has elapsed. This often takes place ahead of the bank has verified that the funds are available. The bank tends to make the amount of the cheque available for withdrawal but it hasn't really cleared.
Some unscrupulous people can use this to their advantage. For example, they could pay by cheque for goods or services, write the wrong amount on the cheque, ask for a refund and disappear with the cash well ahead of the cheque clearing procedure is comprehensive. When the original cheque bounces, it is the small organization that is left facing an angry bank manager and a big bill.
Payment Aid For Businesses
Fortunately, there are other ways for organizations to receive funds from their customers. The first is the Banks Automated Clearing System (BACS). This is a secure method in which payments take only three days to clear. This system is generally utilised to pay salary cheques straight to employee's bank accounts.
A a lot more costly method (with costs around 25 per transaction) is the Clearing Residence Automated Payment System (CHAPS). This program permits identical day electronic cash transfers.
Enterprise owners who are worried about becoming left with a big debt really should think about obtaining their clients to spend by a single of these systems exactly where feasible. This will reduce the high company cost of bounced cheques. www.burntwoodhotel.com
