60% of businesses are not aware of the National Payments Plan (NPP), a Government initiative which aims to make savings of €1bn annually to the Irish economy by increasing the use of electronic forms of payment such as debit cards and electronic banking.
The survey of SMEs carried out by Sage Ireland also revealed that 70% of businesses have not heard of eDay, despite the fact that 77% use cheques on at least a monthly basis. eDay is one of five initiatives in the NPP, and aims to reduce cheque usage in the economy. From September 19th, all central Government, local authorities and State agencies will no longer issue or accept business cheques.
According to Simon Bell, commercial manager, Sage Ireland: “SMEs are the biggest users of cheques accounting for 43% of cheques received in Ireland. This survey shows an alarmingly low level of awareness about the NPP. Businesses need to ensure they are prepared for the eDay change and realise that saying the cheque is in the post will now longer work as an excuse for late payment.”
The research highlights the risks of a cheque-based system and the challenges that businesses can face when issuing and receiving cheques. Of the 97% of businesses that accept cheques, 72% of invoices paid by cheque are late, with 25% of payments more than a month overdue. The most common excuses for delayed payments are ‘the cheque is in the post’ (29%) and ‘I didn’t receive that invoice’ (27%).
The survey also found that a significant amount of working hours are lost by businesses lodging cheques to their bank. 19% of businesses make lodgments on a daily basis with 39% making lodgments on a weekly basis. 33% of businesses say that it takes an hour or more for a member of staff to lodge cheques to the bank.
Sage estimates that a small business owner/manager sending and receiving just six cheques a week could save almost €5,000 per year by switching to ePayments.
Businesses that are currently making payments to government agencies by cheque will no longer have this option and the associated credit timelines it provides. In the past, where a cheque in the post meant a week or so before it was processed, ePayments will reduce the timeline to typically less than 24 hours.
Bell continued: “Businesses will have to think a little differently about the payment methods that they make available to customers, as a delayed receipt coupled with an instant payment to government may leave them with a temporary but significant cashflow issue.”
The Central Bank-led and Government-backed NPP initiative aims to double the level of e-payments in Ireland by 2015 to bring Irish use of cash and cheques in transactions down. Ireland is one of the lowest users of ePayments is Europe, with 133 ePayments per capita per annum versus the EU average of 273.