Cheques have been used in business transactions for centuries and remain a reliable and valuable form of payment. Although digital payments have become increasingly popular, cheques offer unique benefits that cannot be matched by electronic transactions. In this blog post, we will explore in-depth the advantages of using cheques for business transactions.
One of the most significant benefits of using cheques for business transactions is security. Unlike electronic transactions, cheques are tangible and require physical signatures from authorized signatories. This makes it difficult for anyone else to cash the cheque or commit fraud. In addition, cheques can be tracked and monitored, which means that if they are lost or stolen, they can be canceled or stopped, reducing the risk of fraudulent activity.
For example, imagine a small business owner who frequently orders supplies from a local vendor. They write a cheque to the vendor and mail it, but the vendor never receives it. With a cancelled cheque, the business owner can stop payment on the original cheque and issue a new one to the vendor, without incurring any financial loss.
2. Record Keeping
Another significant benefit of using cheques for business transactions is record-keeping. When a cheque is written, it is usually accompanied by an invoice or receipt, which makes it easy to reconcile payments and track expenses. This can be especially helpful during tax season, as it makes it easy to document expenses and ensure accurate record-keeping.
For example, consider a small business owner who writes a cheque for rent payment. The cheque serves as proof of payment, which can be used for tax purposes or in the event of a dispute with the landlord.
3. Payment Flexibility
Cheques offer payment flexibility for both the payer and payee. For payers, cheques allow them to pay bills and invoices on a specific date, rather than having to worry about making payments in real-time. This can be especially helpful for businesses with fluctuating cash flows, as it allows them to time payments strategically to avoid overdrafts or missed payments.
For payees, cheques offer a way to receive payments without having to worry about the hassle of electronic transfers or the fees associated with credit card transactions. In addition, cheques can be deposited at any time, which means that payees do not have to wait for payment to clear before accessing funds.
For example, a small business owner may write a cheque to their marketing consultant, who lives in another city. The consultant can deposit the cheque at their local bank, and the funds will be available to them within a few business days.
Using cheques can also improve a business’s creditworthiness. Writing cheques shows that a business has established relationships with suppliers and vendors, and is able to pay its bills on time. This can be especially important for businesses looking to secure financing or expand their operations.
Suppose a small business owner is seeking financing to purchase new equipment. Demonstrating a history of timely payments to suppliers and vendors can increase their credibility in the eyes of lenders and improve their chances of being viewed as a trustworthy borrower.
5. Personal Touch
Finally, there is a personal touch to using cheques that is lacking in electronic transactions. Writing a cheque shows that a business is willing to take the time to make a payment and provides an opportunity to include a note or message with the payment.
Consider a scenario where a small business owner writes a cheque to a local charity and includes a message expressing their admiration and support for the charity’s mission. This personal touch can go a long way in strengthening relationships with vendors, suppliers, and other business partners.
In conclusion, although digital payments have become increasingly popular, cheques remain a valuable form of payment for businesses. They offer security, record-keeping, payment flexibility, creditworthiness, and a personal touch that cannot be matched by electronic transactions. While there are some disadvantages to using cheques, such as the risk of loss or theft, the benefits far outweigh the drawbacks.
It is important to note that as technology continues to evolve, some banks and financial institutions have implemented digital cheque processing, which allows businesses to scan and deposit cheques electronically. This technology has made the process of using cheques even more convenient and efficient, without sacrificing the benefits that come with using cheques for business transactions.
In summary, the benefits of using cheques for business transactions include security, record-keeping, payment flexibility, creditworthiness, and a personal touch. By incorporating cheque payments into their financial strategy, businesses can improve their financial management, build relationships with suppliers and vendors, and establish themselves as reliable borrowers. While digital payments are a convenient option, cheques continue to provide unique advantages that cannot be replicated by electronic transactions.
How to write a cheque?
Below are the steps you will need to do while fill out a cheque:
- Write the date in the top right corner
- Write the exact name of the recipient next to “Pay”
- Write the payment amount in numbers next to the “$” symbol
- Write the payment amount in words on the long line
- Sign with you signature in the bottom right straight line
If you are not sure how to write the payment amounts in English words, you can try to use our cheque amount to words converter.