2014 promises to be a watershed year for Irish payments. Most obviously, a Single Euro Payments Area (SEPA) will finally become a reality, and paying a supplier in Munich will become as easy as paying one in Mullingar. However the planning for SEPA has exposed significant weaknesses in Irish payments. In particular, cheque usage remains a dominant form of payment for Irish small and medium sized enterprises, when businesses in most of the rest of Europe have phased them out a long time ago.
There is a significant prize if Irish businesses can change this cheque-centric culture:
- Late payments: There is a strong correlation between the extent of cheque usage in a country and the time it takes for businesses to receive payment for invoices. Typically it takes around a month longer for businesses to pay other businesses in cheque centric countries than it does in the rest of Europe.
- Cost: Cheques are an expensive way to do business. The ECB have estimated that the entire end-to-end cost of cheques is €3.55 for every cheque written in Europe.
- Online business: More and more commerce is now taking place in the electronic and mobile channels, and paper-based instruments like cash and cheques are simply not a viable option.
It is for these reasons that the Government has announced an e-Day on 19th September next, the second watershed date for payments in the 2014 calendar. From that day, government departments, local authorities and state agencies will no longer use cheques in their dealings with businesses. This date will be an opportunity for businesses to transform their entire payment process, not just their dealings with the public service. However it is also a challenge to make sure that businesses have the right information, support and financial management tools to manage this change efficiently.