Reprieve for Cheques

So after all the head scratching about how to replace payments by cheque, we're not going to lose them after all. They had been due to be phased out completely by 2018, but no-one has been able to come up with a viable alternative, so the decision has been reversed.

Reasons for Phasing Out Cheques

The original proposals to stop them had been made because the number of payments by cheque has been dropping significantly since the early 1990s, culminating in a reduction by nearly half over the last five years. The widespread use of other methods of payment such as direct debits, BACS or CHAPs, or plastic cards in person or on the phone or internet has also saved the expense and hassle of preparing, signing and sending cheques by post.

Reasons for Not Phasing Them out

However, last month the Payments Council announced that the planned closing of cheque clearing has been cancelled. This was agreed, their announcement said, after they had consulted with over 600 stakeholder groups. Also, its members had been unable to come up with the paper based solution to using cheques, which would be essential to some sectors of the community including some small businesses. And we probably all know how much opposition there has been from members of the public and the MPs representing them, as well as charities which often receive donations by cheque.

Cheques are More Risky Now

While 2018 is still a way off, and many small businesses have not yet started to put other payment options in place, some retailers have already stopped accepting cheques. Will they have to do a U-turn? The problem is that cheques no longer have a guarantee, letting the banks off the hook if they are fraudulent.

Anyone who exchanges goods or services for a cheque from someone they don't know and trust is asking for trouble. So people who want to continue using them are still likely to find it difficult to get them accepted now that the cheque guarantee card can no longer be used.

There may not be much risk in continuing to accept cheques from long-term and trusted customers, or those you have for which you have completed credit checks. It's a different matter though, if you are dealing with individuals on a one-off basis, and have no way of knowing if their cheques are genuine.

Your outsourced bookkeepers are well aware of the problems and know how their other clients are dealing with them. Why not ask them for advice if you are unsure of anything?

Can You Pay Your Bills on Time?

A major problem for small businesses is late payments. While individuals usually pay on time, the business to business sector really suffers here. Those who supply goods or services to major companies frequently experience long delays in getting paid. Some have to resort to factoring, which incurs more expense for them. It seems that many larger organisations follow their own terms for payment, completely ignoring the terms on invoices they receive.

Results of Late Payment Receipts

It's a vicious circle, because if you don't get paid by your customers, you have problems paying your own suppliers. You can charge interest for late payments but most small businesses are reluctant to do so in case the customer decides to go elsewhere and they lose future business.

Late payments can cause serious problems for small businesses. Some may not even be able to pay their staff if their cash flow projections are nullified by not receiving expected income.

Sometimes accepting what appears to be lucrative business can make a small business vulnerable. For example, a provider of cross border deliveries from the UK to Europe has significant expenses in performing the service. The cost of fuel, ferry crossings and overnight stays can be crippling if the company has to wait 90 days or more for payment.

Your Legal Rights

Legislation to encourage prompt payment now includes an entitlement to reasonable compensation for debt recovery costs. The calculation of interest entitlement was simplified in 2002. It is now based on a reference rate, which is currently the Bank of England base rate as at 30^th June, plus 8%. This means that the maximum that can be charged from the present to December 31^st 2011 is 8.5% of the debt per year, so you just have to multiply that figure by the number of days the payment is late and then divide by 365. The bank's base rate at December 31st will become the new reference rate for the next six months.

What to do About it

If you are concerned about this affecting your business, you need to review your credit control practices. Outsourced bookkeepers can help with this if you don't have the time or the staff to cover it. If you don't want to charge the statutory interest you're entitled to, you could offer a discount for prompt payment, which might be a cheaper option than factoring or waiting for those late payers. Your outsourced bookkeepers might come up with other ideas too. Don't forget to make full use of their experience and expertise.

After the August Riot Mayhem

Most businesses in the areas of the recent rioting have been affected in some way. Even those serving the public on the fringes lost revenue either because people stayed away thinking it too risky to come there, or because management decided to close much earlier than usual and get their staff out of the area before nightfall.

Of those small businesses that were damaged by rioters, sadly many will not survive. But there is some help out there for those determined to struggle on.

Claiming for Damage and Loss

The Riot Damages Act of 1886 is still in force, which means that businesses can claim for damage to goods and premises or loss of stock by looting. Unfortunately, the form to be used to make claims is an antique, but you do have six weeks to submit it. As long as the police agree that a riot was taking place in your area at the time, your claim should be honoured, though it could take some time for the cash to arrive. You might also benefit from a suspension of council tax and business rates for a while.

Claiming on Insurance Policies

Support is available from the Forum of Private Business if you aren't sure whether your insurance will cover you. Whether or not you are a member, its underwriters will assess your cover and give you free advice if you call them on 0845 130 1722.

HMRC Helpline

HM Revenue and Customs has set up a telephone helpline for people and businesses affected by the riots. If you are going to have trouble meeting your tax commitments or you have lost your tax records in the mayhem, call it on 0845 3661207 any day between 8 am and 8 pm. The department has pledged to be sympathetic with difficulties, not to impose surcharges and to review whether penalties should be imposed.

Entrepreneurs Help Each Other

Various other types of support have been offered by businesses keen to help. Social media sites are full of such offers, for example:

· @riotcleanup is a new twitter account where people can offer assistance and publicise cleaning up events

· Workspace Group, a London commercial property company, is offering temporary storage and work stations for those in need

· Stockline Ltd can help with high quality refurbishment where needed for damaged property

· Lockaid has country wide branches that can help with general security, including boarding up or repairing windows.

It's good to see the business community pulling together like this. If you are among the lucky ones that haven't been adversely affected, perhaps there is something you could offer.