As a payment method from clients, cheques generally play a big part for most Small to Medium Enterprises (SME’s) but the banks are attempting to withdraw cheques in the future.
In the meantime, I think that the banks are doing their very best to kick-start their plan early. My wife pays her horse trainer per session and this is usually in the form of a cheque. Recently the trainer said that she would now have to charge an extra £1 per cheque as this is now what her bank is charging her! So the cost of running her delicately positioned business has now gone up 3.33% (£30+1 – a cheque for £10 would be 10%!).
I used to work in the IT department of a clearing house bank in central London in the 80′s. I know that the cost of a large building in London’s Square Mile plus the infrastructure, cutting edge technology and personnel equals huge overheads for the banks. (But the bank used to make millions of £’s profit from people using cheques. I assume that its the same today but maybe the volumes of cheques have decreased). What I can’t see is how charging a sole trader £1 per cheque will pay for their overheads but then again we used to process 100’000′s of cheques PER DAY! So when you multiple this by the 3.33% (or higher) you can see why the banks are so keen.
Sole Traders & SME’s need cheque payment facilities. Most can’t afford running Chip & PIN machines and some are not PC literate or worried about security issues so don’t want to use Bank Transfers. Does this mean that the sole trader and small business will revert more to cash transactions? The banks wouldn’t like this as they’d lose revenue from the fewer transactions. The government wouldn’t like this as they’d lose revenue from reduced declared earnings. Now I’m not saying that all small businesses and sole traders are Tax Avoiders (however, I’m sure there’s at least one person out there who’s got a very padded mattress and its not wool), but this sort of thing could lead these people into more temptation.
So what do SME’s do in the meatime. Shop around!
Take a look at this article, it may help you…http://www.ktpknowledge.co.uk/index.php?option=com_content&task=view&id=785&Itemid=2
Long term solution: Get the government to force the banks to;
- Retain the cheque facility until something better arrives and is not so expensive to manage
- Withdraw all bank charges from Sole Traders & Small businesses until their profit margins reach an agreed level
What do you think?