Here is a list of the disadvantages of cheques that have led people to adopt modern electronic options for making and receiving payments.
The cheque can be returned or stopped: This is a very relevant issue if you are selling any goods. Your customer or client may pay using the cheque and take the goods. Then, they may stop the payment or there may not be sufficient funds in their account to clear the cheque. In that case, you will have to pay for the goods yourself. The process of collecting payment from such customers is also quite difficult in most cases.
Bookkeeping is more challenging with cheques: Every time you write a cheque, you have to note down the cheque number and the account holder details. If not, you will have to wait till the cheque clears to see the transaction details in your account statement. On the other hand, when you use electronic banking methods, you get the record immediately. You receive a transaction ID with all the details of the payment via SMS or email. This can be very useful in case any transaction gets disputed in the future.
Higher chances of fraud: Checks are easier to access and more open to fraud. It is very easy for someone to write or sign a check. They can easily forge a check and pass it off as an authorized check. This is an essential point for large firms to consider as they are more vulnerable to financial fraud. Someone can issue or receive fraudulent checks. These are very difficult to track and recover even after the suspected fraud is proven.
Checks take time to clear: If you receive payment via check, you must first go to the bank and deposit it. Then, you have to wait up to 7 business days for the check to clear. If you are a small organization, you may not have the staff or time to go through this process every time you receive a check payment.
You will have to re-apply for a cheque book:
If the cheque leaf in your cheque book has run out, you will have to send an application for a new chequebook. If you are a large organization that makes several transactions every day, this can be quite a hassle. You will have to go in person to collect these cheques or write an authorization letter for someone else to collect it on your behalf.
A merchant signing a cheque with a pen on his laptop
Whether you want to use cheques for your business transactions or not depends on two factors:
The size of your organisation and operations
The most preferred method for your customer.
There is no doubt that cheques are outdated in the modern business system. However, it is advisable to be open to this form of business transactions as it offers you several benefits. Additionally, it is an additional medium to make and receive payments. Hence, it is never a bad thing for any business.
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