Wednesday, 13 March 2013
Once upon a time, customers would have had to turn up with a literal bag of cash (or possibly a chicken to barter with). This isn't very convenient. I've never seen face-to-face many of the people who pay me money. They insist on living in inconvenient places like London and New York. So someone had the clever idea of writing a promissory note that would be accepted by a bank as evidence of the wish to transfer virtual cash. A cheque. (Sorry, US folks, this is one case where your Ben Franklin et al simplified spelling goes horribly wrong. Calling it a 'check' doesn't work, because 'check' already means something else.) This could just be slipped in the post. Simples.
However, just as vinyl was replaced by CDs, themselves now being replaced by downloads, so the cheques that replaced cash are themselves being ousted by electronic funds transfer (usually in the form of BACS in the UK). And it's brilliant. It is genuinely win-win.
Using the cheque model, I have to wait for the cheque to come through the post, I have to make the effort to visit the bank to pay it in, I have to wait 3 working days for it to clear. And the bank kindly charges me 70p for the privilege of accepting it. By contrast, a BACS payment involves me doing nothing, can happen instantly, and isn't charged for by my bank. (Some banks do, I know.) The only downside from my viewpoint is that some customers are rather sloppy about sending out an electronic remittance advice to accompany the payment, so it's not always entirely obvious what a payment is for.
Surely, though, it's worse for the company making the payment? No, no, and thrice no. They too have lower costs by using electronic payments. Their bank will charge them for each cheque they write, but may not charge for paying this way. The company has to produce the paperwork to accompany the cheque and to post the whole thing. They have to get a director or someone else important to append their pretty signature. There's the cost of postage and of the admin effort required. Okay, the one advantage of the cheque is for their cashflow - they get to hold onto their money a few days longer - but with interest rates what they are, this is no great benefit.
So why, I ask, why is that a couple of the publishers I deal with insist on still using cheques? Come on, guys, get with the trend. I'm surprised they aren't offering chickens.
* Aside rant: I was furious to hear some US academic economist type on the news yesterday, who was criticizing the UK's claim to have falling unemployment. He said something to the effect of 'Yes, but these aren't real jobs, they're mostly self employed or low pay.' I'm sorry? Being self employed isn't having a real job? I've been self-employed now for around 19 years, merrily paying tax, buying goods and not being a burden on the state. Could you explain to me Mr Overpaid and Unnecessary Economist (because, let's face it, being an economist isn't exactly real employment) in what sense mine is not a real job? Grrr.