Do you realize how much trouble is taken to make a payment by check? You have to write the words and amount, the name of payee, the date and cross the check. You should also have a covering letter or write the details of the payment at the back of the check. You should also write the address of the payee on the envelope, put a stamp and mail the check.
If you factor the cost of the time taken by the admin staff to handle the payment, it could easily amount to $5 to $10. The party that receives the cheque also has to do a lot of work to clear the check. If they are automated, the cost may be lower, but still quite significant.
You should not make any small mistake as the bank will happily bounced your check, and you have to incur the cost all over again. The bank may even impose a hefty penalty on you for the rejected check. See the photo before for the work that is required to pay the check and to make sure that there is no mistake.
If you factor the cost of the time taken by the admin staff to handle the payment, it could easily amount to $5 to $10. The party that receives the cheque also has to do a lot of work to clear the check. If they are automated, the cost may be lower, but still quite significant.
You should not make any small mistake as the bank will happily bounced your check, and you have to incur the cost all over again. The bank may even impose a hefty penalty on you for the rejected check. See the photo before for the work that is required to pay the check and to make sure that there is no mistake.
It is inefficient and costly for small businesses to make and receive payments by checks - but they do not have any alternative! I have urged our banks in Singapore to introduce an electronic payment system which includes a notification service.
My letter on this matter was published in Today newspaper and reprinted in this blog. I have also written to two banks, to the IDA and the Association of Banks on this matter. I hope that more people will come forward to express their support.
The two checks were for payment of monthly maintenance fee for my condos. I used to have the payments deducted automatically through GIRO, but for some unknown reason, they did not work. The managing agent imposed a late interest charge and I had to write the checks for the payment. It is quite a hassle!
ReplyDeleterex comments as follows,
ReplyDeleteIn my experience, all the payees i deal with are quite happy to give me their Coporate bank account number when i ask them. I just use their account number and define them as a Payee List in my bank's website and i remit funds to them regularly by internet. I had stopped writing checks for a long time already.
The only problem is that you have to key in the number of the payees account and their bank and branch code. However, this is a once off chore, and the complexity varies from bank to bank. but so far i didnt have any major problems with the system, the technolgoy works.
For the more common organisations, they dont need you to key in the bank account number and they are alrady part of drop down list in most bank websites. That is even easier still.
Basically what need to be done is that Payee organisations should pro-actively encourage their customers to pay by internet. Strangely enough this is not happening in the current system/
The customer has to initiate the process and ask the payee organisation. It is very strange thing!!
rex
@Rex
ReplyDeleteAfter you get the corporate bank account and go through the hassle of authenticating the account with your mobile phone (I am referring to DBS), you still have to send an e-mail to notify the payee of the payment (and sometimes, they do not have a corporate e-mail). And, if you already have used up your quota of payee (and I am referring again to DBS), you have to delete some of the payee records to accommodate one more. Sure, it is possible, but it is a lot of hassle - quite typical of the complexity in many activities in Singapore. We can simplify our processes, reduce cost and save a lot of hassle for everybody - but we are slow to make the changes, and our business sectors thrive on the complications - so they can levy exorbitant interest on late payments, etc.
@Rex
ReplyDeleteLet me tell you the experience of a small business receiving payment by internet banking transfer. It is not practical. My staff have to log in every day to see who has paid me, and the staff will have access to the other transactions in the bank account - some of which are confidential. If the staff does not login, the director has to do this work himself (and that's me). Even if the customer sent a email to notify me about the payment, someone stil has to login to check that the payment has already been received. This is why most companies do not welcome internet banking transfers.
The inexplicable thing about Internet fund transfers is that it typically takes 2 days to transfer between banks. So it is slower than payment by cheque, unless one pays extra for same day transfer. While the money has been deducted from your account and is Somewhere, only to be credited into the other party's account 2 days later. Is this the banking experience in other countries?
ReplyDeleterex comments as follows,
ReplyDeletethnks for the comments. I had never realised the hassle you mentioned on the receiving side of the transaction, it was an interesting description you mentioned.
to solve the confidentiality problem i guess you just have to create a separate bank account solely for the reciving of money of non confidential nature...
rex
Hi Rex
ReplyDeleteThank you for your helpful suggestion. I did consider it before, but there are still too many issues, so I did not implement it.
I have been thinking of this type of problem for several years, and have urged the banks to introduce a system that can reduce the hassle for everybody. I am still working on this solution.
For foreign bill payment we use credit card and pay through PAYPAL, as for local payment, we simply use cheques or internet bank transfers.
ReplyDeleteDun see what's the big deal.
Many small Companies prefer to pay and receive cheques for transactions.
@yuyuan
ReplyDeleteI run a small company. I make payments by checks and receive payments by checks. It is time consuming and costly to make and receive payment by checks. The time spend by my staff in this inefficient mode of payment is costly. This problem affects most small businesses in Singapore. It adds to the cost of doing business, and makes Singapore to be quite expensive.
Citibank personal banking provide send out cheque on behalf, I just need click online, thus minimize mistakes. I save on stamps too. One do not need to be high income earner to join.
ReplyDelete