Should Your Small Business Accept Cheques in Canada?

As a small business owner, making wise financial decisions is always at the top of your mind. Such important decisions need to be made even when receiving payments, as there are fees associated with all types of transactions, besides cash, that you could receive from customers. 

These fees result in many small businesses being particular about payment methods they may choose to receive or decline. For example, some smaller companies might refuse to take credit, certain types of cards, or even cheques, to mitigate the hefty fees attached to these payment methods by financial institutions. 

This article will discuss the fees associated with cheques and whether or not your company should accept them. 

Advantages of Accepting Cheques

Many customers, even today, prefer using cheques over credit or debit cards. To process transactions from such clients, it may be important for your business to keep the option of accepting cheques open. Following are some of the benefits associated with accepting cheques:

Increase the chances of completing sales

For several reasons, some customers may choose to make payments using cheques. If your organization has a policy against accepting checks, you risk losing business if your target market is made up of customers who do so. Additionally, if the majority of your clientele are other businesses, it may be standard for them to anticipate receiving an invoice following delivery and paying you with a corporate cheque. Consider requiring payment in cash for future orders if one of these clients' cheques is returned.

Process cheques electronically 

Processing cheques electronically before a customer leaves your store or completes a purchase on your website is an alternative to taking paper cheques. Although there is a cheaper processing cost, electronic checks are processed similarly to credit cards. Cheques are swiped into a machine at the store. 

When a consumer enters the routing and bank account numbers from the bottom of their cheque on your website, money is immediately sent to your account and simultaneously deducted from the customer's bank account. Although processing could take a few days, receiving cheques for your company is a more dependable option.

Cheques are easy to process

To accept credit and debit cards, your company may need to invest in credit and debit processing systems and pay processing fees too. Suppose your business accepts a few transactions during a month. In that case, especially if you mostly do business-to-business transactions, you may be better off accepting cheques and depositing them at the bank. This eliminates the need to invest in credit or debit card processing systems.

The Hidden Cost of Cheques

Cheques can be an excellent way to receive large payments when cash isn’t available. However, various fees are associated with this type of payment that your small business must be aware of before accepting them. On top of these fees, other factors can dictate when and how much money you will receive from a customer’s cheque payment. 

Cheque processing

One of the heftiest fees attached to cheques in Canada is the cheque processing fee. These fees can be expensive and even more so when you are cashing in multiples.

For example, the cheque and payment processing service fees for Scotiabank range from $5 to over $48, depending on the situation. On average, cheques cost between $2.00 to $3.85 more to process than electronic payments. As a result, the total cost of a cheque can be anywhere from $15-$25, and in some cases, it can be as expensive as $50 for just one cheque!

Time delays

We all know that in today’s age, time is money, and cheques can waste a lot of time. This delay, or hold, in receiving your payment is an added cost that should be considered when discussing the cheque process. 

Since we live in the age of technology, using any type of electronic payment, like e-transfers and mobile payments, is a more practical option as it saves time, money, and even the environment. 

Foreign currency

If your company works with other firms or clients outside of Canada, then there are further exchange fees you will need to pay when depositing their foreign currency cheques. 

These fees are determined by the amount the foreign cheque is for. Foreign cheques under $1000 are typically $10 to process, while those over $1000 charge a fee of $15. That being said, these types of fees can differ depending on your business bank account

Cashing costs

One of the smallest fees associated with Canadian cheques is the cashing cost. If you need to cash a customer’s cheque and receive the funds right away, you will generally need to spend $5 to do so. This might not seem like a lot, especially if the customer amount is rather large. However, these expenses add up over time, inevitably costing your company large sums of money overall. 

Cheque Payments FAQs

Do cheques expire? How long are cheques good for?

If you write a cheque or receive a cheque and it doesn’t get deposited and cashed within six months of its date, it is considered to be an expired cheque. This doesn’t mean that it is entirely invalid, though. The bank or financial institution may still accept this payment, but they are not legally required to do so. 

It is at the discretion of the bank in question to decide when or if they take an expired cheque. The only exception to this rule is when the cheque is certified. This includes Government of Canada cheques. However, to certify a cheque, you will need to pay a fee ranging from $10 to $15, depending on the bank. 

Should you use personal cheques or business cheques?

If you just started your own company, you may be wondering if it is worth getting business cheques rather than just using your personal ones. You don’t need to use business cheques for your business accounts. It truly is up to you and your payment preferences. 

For some, it may be easier to keep track of their finances by using a separate method, but by no means is it necessary to. By creating business cheques, you will likely have additional fees to pay, which may be something you wish to consider as a small business owner.

What are post-dated cheques?

A post-dated cheque is simply a cheque with a future date written on it rather than the current date it was filled in. If you are given or receive a post-dated cheque, you need to understand how this method of payment works.

In most cases, when you are given a post-dated cheque, you can make deposits at any time. That being said, the money will not be available until the date indicated on the paper. It is actually easier to simply wait until the written date to cash the cheque. As the funds will not be available until then, it will allow you to keep track of your account balance and overall cash flow easier.

You may want to pay someone using a post-dated cheque if they will be completing work for you at a later date, but request proof of payment upfront. Or you may require the same from a customer who has pre-ordered your products or services. 

Do financial institutions take cancelled cheques?

To understand what happens to a cancelled cheque, you should first understand what a cancelled cheque is. First, a cancelled cheque has been deposited and then cleared by the bank so that it cannot be used again. 

Second, and most likely, it refers to a situation whereby the cheque’s writer cancels the payment before it can be deposited into the receiving account. In this instance, the one given the cheque will not receive the payment.

In both of these cases, the cheque is no longer usable and has no value. Someone will rarely cancel their cheque unless whatever they were paying for was not delivered. That being said, cancelled cheques can sometimes be part of a scam, so it is vital to protect your establishment against such attacks. 

Cheques as Payments Canada

Overall, cheques are not the best way of payment in today’s age. In the modern world we live in, we have a variety of other payment options which are more efficient, affordable, and reliable. Therefore, it is up to your small business whether or not you choose to take this payment method or even use them for your own business expenses. 

No matter what forms of payment you receive, whether paper or electronic, QuickBooks Online can help you to keep your finances in order. You can organize your payments, track cash flow, store receipts, create invoices, and more with the help of QuickBooks accounting software. Try it for free today to start simplifying your payment process right away.

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