Why do some Companies still pay by Cheque?

(btw that’s correct spelling for Australian – “Check” if you’re American)

At least inside Australia, paying by direct bank transfer is very easy, and fast. For some things, paying by credit card is easier although one side tends to have to eat some costs for that (% to the credit card gateway).

What surprises me is that some companies still pay by cheque. Process-wise, this makes no sense to me:

  1. write out the cheque
  2. get signature from authorised person in the company
  3. address envelope
  4. post

What a lot of effort!

After due consideration, I can think of only one reason why companies do this: cashflow management, aka by sending a cheque through the mail they’re actually delaying the payment coming out of their bank account.

If it is just cashflow trickery, do you feel that kind of business process is valid? Shouldn’t a company just be able to pay its invoices when they come in?

What do you think? Any other plausible reasons?

2 thoughts on “Why do some Companies still pay by Cheque?”

  1. It’s worse than that – as an Australian business, if a US or other foreign entity sends you a cheque, it takes up to *6 weeks* to clear, as it must be physically sent back to the issuing bank to be validated, then sent back to your local bank for final processing. Add to that a typical clearance fee between $10 and $30, it’s bad business all round. You also get no control over the timing of the transaction and therefore the exchange rate that you receive in the transaction.

    In my experience, even the biggest corporate clients can be convinced to pay by direct credit, particularly if they need your services and you just make it a condition of doing business. Same goes for 30 vs 60 or even 90 day terms. Be polite, firm, and confident in the value of what you are offering them.

    Having a US bank account is helpful, these are offered by all the major banks in Australia and cost about $10-$20/month to maintain. The greater volume of foreign currency transactions you do, the more bargaining power you have with them in waiving or reducing fees etc.

    Remember, everything is negotiable in a competitive market!

  2. I still have a few clients that pay by cheque. Small non profits in the edu sector. They report that most of their clients, namely schools, still pay by cheque.

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