Craig Smith, managing director of finance and administration at Parseq, explores the new cheque processing and clearing rules coming into effect in 2017 and what they will mean for businesses.
Next year the process of handling, processing and clearing payments by cheque will begin a radical transformation towards the new clearing model enabled by recent legislation.
The changes will mean from March 2017 all UK banks must be in a position to accept scanned images of cheques into the clearing process. Then by October 31st, when the full impact of the new rules are implemented , financial institutions must also be able to generate digital images and data files of cheques received and have processes in place to clear a cheque within a maximum of two working days.
These changes may not be felt by some businesses, but for others this will be hugely beneficial.
Until the new legislation comes into play the law dictates that banks physically need to transport cheques to central clearing centres where the details on the cheques are then read and confirmed. Cheque code-line data is sent across a secure network to other banks and the actual cheques are exchanged as well. It is a slow and labour intensive process, but until the changes next year it’s necessary as it’s a banks right to ‘see’ the cheque before they decide whether to pay it or not.
Cheque imaging will reduce the level of labour required markedly. Banks or business partner organisations such as Parseq will be able to scan the cheque directly to the payee’s bank along with code-line data across a secure network.
The news of new legislation to improve cheque payment processes may come as a surprise to many, especially as it seems the humble cheque had been written off.
Martin Ruda, group managing director of The TALL Group of Companies who work in partnership with Parseq says: “Every now and then a news story appears which claims that the demise of the cheque is only a hair’s breadth away from happening. Yet, here we are in 2016 and not only are cheques still being used in their millions – 450 million[i] – to be precise, but technology and Government legislation is also evolving to make their use as efficient and cost effective as possible.
“These changes demonstrate the relevance cheques have to a market that perhaps doesn’t feel as comfortable or confident with some of the more modern methods of payment available. What’s more, for businesses cheques have always given them cash flow flexibility – something few other payment models can offer.”
And Martin is right. It may seem an outdated method of payment to many who have fully embraced the world of contactless payment and online banking, but the reality is cheques still account for a significant number of transaction in the UK. According to recent figures 38 per cent of consumers use cheque payment and so do more than half (55 per cent) of businesses.[ii]
We conservatively estimate that Parseq handles more than 25,000 cheques a day on behalf of our clients in utilities and financial services and these changes will without question transform and improve how they process these payments. The new legislation will enable us to scan the cheque on our clients’ behalf and get the payment process underway which in real terms could mean the money will be available in as little as 48 hours.
Processing times for cheque payments have always been a benefit on the one hand and a criticism on the other. For the person or organisation paying with a cheque the five working day clearing process was a blessing to help manage cash flow, but for the payee it has been a frustration. Both positions have been considered in the new legislation.
Banks will initially have a two (working) day timeframe for clearing cheques. But, rumours have already begun to surface that the aim is to process the payments in near real time.
Ruda adds: “The changes state that clearing must take no longer than two working days, but I suspect once the process is up and running, it will be next to real time in many instances.”
For customer service driven sectors, such as those operating with utilities and financial services, it’s vital that they offer their customers payment choice and flexibility, but they like any other commercial operation need to have payments processed as quickly as possible to pump back into the business.
However, a question which has been raised is, if the cheque can be processed – in theory – under these new changes in near real time, won’t people just pay by online transfer or direct debit? What’s in it for the payee?
“By introducing image-based processing models the industry is actually protecting the future use of cheques so that customers can carry on using cheques for as long as they want. Customers need do nothing differently to what they do at present, they can walk to the bank and deposit the paper cheque over the counter if they wish. Most changes would take place ‘behind the scenes’. If however a bank decides to offer its customers cheque imaging tools on mobile banking apps and scanning products which an image model enables, then it will be a customer’s choice if they decide to use these. It’s win / win for customers.” Explains Ruda.
Banks are already gearing up for the expected changes. Last summer Lloyds launched a four week trial amongst 1,700 staff to try out its mobile cheque imaging technology and 30,000 of Barclays’ customers are already using similar apps from their smart phones.
It’s also understood that conversations have already begun between banks and certain commercial customers about what clearing options they want.
Convenience of payment and management of cash flow isn’t the only reason some customers choose to pay by cheque. Others use it because it’s widely regarded as one of the safest payment transactions.
Ruda states: “There are many physical security measures in place to detect cheque payment fraud. In its physical form a cheque has a Ultra Violet layer of ink which can only been seen under a special light which can help to indicate if the cheque has been tampered with – for example, changing a £50 payment to £500.
“In the five working days it currently takes to clear a cheque several physical checks are made and there is time to decline a payment if any of these checks aren’t satisfied.
“These checks won’t necessarily be replicated into the introduction of image processing. That said, commitments have been made to safeguard the safety credentials of the cheque, it’s just not fully understood how at this stage.”
The issue of security and item validation is something we’ve been discussing at length with our customers and partners such as The TALL Group with the latter soon to launch an innovative new solution to the market to address these concerns.
In my view the people who say the death of the cheque is imminent are acting on the false assumption that everyone is using online banking, happy to pay via Direct Debit or even by telephone banking. The reality is, as the figures suggest, this isn’t the case.
There continues to be many people who find cheque payment the most convenient method and will not be swayed by the introduction of an app for their smart phone as a means to make their cheque book redundant. What’s more the new legislation reflects this.
Businesses need to prepare for Brexit transition now
THE Brexit process has been marred by uncertainty and it still remains unclear what our future relationship with the EU, our biggest trading partner, will be.
By Steve McCrindle, a VAT expert at Haines Watts, looks at things business owners should consider through the transition.
The current transition period is due to end on 31st December, 2020. However, Michael Gove, the Chancellor of the Duchy of Lancaster, revealed in the House of Commons this week that just 24 % of businesses believe they are fully ready for the end of the Brexit transition period. Nearly double – 43% – think the transition period will be extended. The Government however has informed the European Commission that the UK will neither accept or seek an extension to this.
Whether a deal is agreed or we exit on World Trade Organisation terms, it’s clear there will be consequences when it comes to VAT, border control and Customs duty, which, in most cases, will be immediate. This will impact all businesses that trade with the EU.
With only a few months left until the transition ends, businesses need to plan and prepare for all outcomes. While the devil will be in the detail when it comes to the changes, these are some areas that need to be considered.
Supplies of Goods and services and value added tax (VAT)
The movement of goods between Great Britain (GB) (not the UK) and the EU is set to change substantially from January 1, 2021. I use GB because if the Northern Ireland Protocol is executed it will mean Northern Ireland will be treated differently to the rest of the UK. Therefore, it is vital that business owners that trade with Northern Ireland are aware of the consequences post-Brexit.
Exports and imports will replace EU dispatches and acquisitions. Zero-rating for the export of goods will still exist if the relevant conditions are met. As things stand, any goods that are imported are liable for import VAT and potentially Customs duty.
Postponed VAT Accounting for Imports to be introduced
To help lessen this impact, HMRC is going to scrap the current physical charging of import VAT and instead, import VAT will be accounted for by adjustments on VAT returns under a new process called postponed VAT accounting (PVA).
PVA is an automatic process that can help minimise cash outflow for business owners. It will apply to all imports, both from the EU and countries outside the EU. Although there may be different regulations and a process for goods arriving into the UK where the value doesn’t exceed £135.
Status-quo for VAT on services
To avoid double or no taxation, the UK looks set to continue to apply VAT place-of-supply rules in line with the EU VAT Directives, with few changes to the VAT treatment of services envisaged.
What does all this mean for businesses? Well, as examples, business owners will need to think about the business’ liability to be registered for VAT within the EU or alternatively, if they can deregister within the EU. This will be especially important for businesses that provide electronically supplied services to consumers in the EU and also suppliers of goods in GB/UK to non-VAT registered customers in the EU.
New Border Controls
The UK Government confirmed in February that the Brexit transitional arrangements were no longer required and that full Customs controls will be implemented for goods coming into the UK from the EU from January, 1, 2021. However, mainly due to the impact of the Coronavirus crisis, the new requirements will now be introduced in three phases between January and July next year. The Government has also issued a new UK import and export guide to border controls.
During the first phase, businesses importing standard goods will have up to six months to complete Customs declarations. Once the declaration is submitted, any duty will then be due on the goods and the new UK global tariffs (UKGT) will apply. Of course, there will still be checks on controlled goods such as tobacco and alcohol.
From April, the second phase will commence. All imports of products of animal origin, whether that’s meat, honey, milk, egg products or pet food, will need pre-notification and health documentation. This also includes plants and plant products too.
The third phase will kick in from July and any business moving goods will need to make declarations at the point of importation. Customs duty will then be due at this time.
Goods moving between EU Member States are not currently subject to Customs duty and this will remain for UK-EU trade until December 31, 2020. It will only change from January 1, 2021. Businesses will need to plan for Customs duty compliance and also for any financial impact this additional cost will have.
All businesses will need to review their supply chain to ensure they comply with the VAT, border control and Customs duty consequences and requirements post January 1, 2021 and this should be done as soon as possible. Business owners need to prepare for both the administrative and financial impacts – on their businesses over the next few months.
How to maximise your virtual communications for effective team meetings
By Tony Hughes, CEO at Huthwaite International leading global provider of sales, negotiation and communication skills development, shares advice on the key skills your team needs to create a great virtual communications culture.
Virtual meetings are now familiar territory. Despite this, many of us are unaware how to make them truly effective.
Understand the purpose
We’re all inundated with video call after video call, whether that’s for business meetings with colleagues or socialising with friends – it’s become a daily occurrence for most. If you had six or seven face-to-face meetings each day, you would quickly become overwhelmed, so consider this when planning virtual meetings too. Ensure each meeting has a purpose and make it clear to all involved from the start. For example, is the purpose of the meeting to think creatively and generate new ideas or is your aim to get focused and make some important decisions in one or two major areas? Make sure people know what is expected from them in advance.
Also, take into consideration who is attending each meeting. We’re all aware that communicating via video can lead to problems when there are too many people trying to have their say – so don’t overcomplicate it. On the other hand, you don’t want to create additional meetings to communicate the points already agreed so think carefully about who needs to be involved. Base your decisions on your meeting invitations around the meeting purpose.
Engage people in a way that achieves your meeting purpose and manage your communication airtime
Our research into communication skills shows that there are three main classes of behaviour important to group interaction in task oriented situations, these are:
- initiating behaviours– putting forward ideas, concepts, suggestions or courses of action
- reacting behaviours– putting forward an evaluation of other people’s contributions
- clarifying behaviours– exchanging information, facts, opinions for the benefit of the whole meeting.
Feedback on the proportions of these behaviours used in meetings can help groups examine their own behaviour and to assess the need for behaviour change. In effective group communications, all three main behaviour classes are present in a balanced way.
A tip to help set a good, cooperative tone for a virtual meeting and encourage a balance of behaviours is to start discussions with a non-controversial issue where people aren’t committed to a particular solution so a straight forward agreement can be reached, before diving into the more contentious areas of the agenda. This encourages people to listen to and build on others’ ideas from the beginning, will help set the tone for the rest of meeting and will be a useful precedent to refer to. Try to structure meetings in a way that means all points are addressed properly and are fully developed before moving on to another issue or suggestion.
Don’t allow discussions to lead to a breakdown in communication
A strong indicator of an effective meeting is how well people respond to one another’s ideas and proposals. When a creative type meeting is working well, people react positively or at least constructively, to what others say. When a meeting is ineffective, the opposite occurs and tensions can rise leading to a potential communication breakdown which will diminish any successful meeting outcomes.
What we might perceive as a negative attitude can lead to what Huthwaite refer to as ‘Defend/Attack’ behaviour where opinions are expressed more strongly and more directly which can lead to people feeling exposed and becoming overly defensive. Defend/Attack usually involves value judgements and contains emotional overtones.
Avoid these behaviours by responding positively and appropriately and most of all, try to actively listen to what is being said. Really take the time to understand a differing point of view point and respect their position before jumping in with a response. Listening is key and our research shows it is often what separates skilled communicators from unskilled. Taking the time to listen will give you time and space to fully consider other opinions. If you decide you do disagree with what they’re saying, actively listening will leave space around the discussion which offers the opportunity to react in a constructive, rather than an emotional manner.
Avoid irritating verbal behaviours
There are a few verbal behaviours that can be instantly harmful to meeting discussions and apply to meetings both in person and online. Virtual meetings can present multiple communication barriers such as poor connections and technology issues, leading to irritation for all parties involved so it’s important not to add further irritation with the words you choose. Declarations that you are being ‘fair’ and ‘reasonable’ when talking to people can cause tension as they can undermine the person you’re speaking to and may cause lasting damage to your relationship.
Other phrases, such as telling someone you’re ‘being honest with them’ or ‘that you’re trying to be frank’, can be very misleading. You don’t intend to imply that weren’t being honest a moment ago but that is the inference you’re allowing by using these kinds of phrases. Building a reputation that you are selectively honest is the kiss of death to a productive meeting. Steer clear of this kind of language if you want to keep your reputation intact.
Make sure meeting standards don’t slip and build trust in your virtual environment
If you are hosting a business meeting online, it’s important that you don’t let your normal meeting standards slip. Try to nominate a meeting manager/chair who can focus on managing the discussion, making sure everyone speaks their turn and that you cover everything that needs to be discussed. Their purpose is to steer and guide the conversation in a productive manner. It’s helpful if the chair can clarify the information presented and the meeting outcomes, especially for long or heated discussions where meeting focus can shift about very easily. This will ensure everyone is clear about what has been agreed.
Arguably, In an online meeting this can be done even more efficiently than in the real world. This is due to video conferencing features such as the ability to ‘highlight’ a particular participant when speaking or sharing links and additional information. So, if you want a meeting to be productive and efficient, use the rich features of the technology available to keep standards high and meetings effective.
Business and data – building better operations
By Bryan Kirschner, Vice President Strategy, DataStax
Building your business on data. What have we learned so far?
Coming into 2020, running your business based on what your data told you was a reality for some businesses, and a goal for many more. The coronavirus pandemic forced all companies to become more digital and more data-driven.
What lessons have we learned so far, and how can companies improve their data-driven processes over time?
There’s a meme going round about how the C-level term that has had the most impact on business and IT strategy in the past few years is not the CEO or CIO, but COVID-19. For some, this will lead to a chuckle at most. For others, it will ring all too true. In 2020, running your business based on what your data told you was a reality for some businesses, and a goal for many more. The pandemic forced all companies to become more digital and more data-driven.
For all businesses, data will continue to be essential to their operations. According to Rita Sallam of Gartner, the top ten trends for data through the rest of 2020 will be about scaling up and being more agile with data, as “… data and analytics leaders require an ever-increasing velocity and scale of analysis in terms of processing and access to succeed in the face of unprecedented market shifts.” COVID-19 has made this trend inevitable.
What comes next for data?
All companies are therefore becoming ‘data-driven’ companies. The challenge coming up is therefore how data can keep being a differentiator for businesses when every enterprise has access to data and analytics.
While companies can all gather data and use it for their operations, the real differentiator is speed. It’s not just that companies can generate and store data at scale, it’s that they can make decisions faster and then deploy data in valuable ways more quickly than their competitors. This plays into the affirmative side of competing against other companies as well – when markets are healthy and dynamic, new opportunities can emerge that you can take advantage of by moving more quickly.
Asking the right questions to get the right answers
Keep a customer focus in mind for your approach to data. By asking questions that focus on what customers need, you can get a head start in creating value that customers are willing to pay for. For example, asking how much your customers are willing to pay for your data products can quickly show you where you are – either you have a great product in place already that data can improve, or it will show you where you need to work harder around using data effectively.
Similarly, you can use data around your goals to improve your decisions. Asking what data your customers want around their interactions with you, and how you can provide them with insights from that data, can get you started. Alongside this, you can look at more strategic goals like how you can improve your Net Promoter Score over and above your competitors, how to reduce churn, or increase lifetime value, by supplying your customers with data products.
The wrong questions about data focus on internal and political issues. For example, if your team has to answer questions on how to prove the net present value of data over five years, or how to negotiate data access between business units, then your focus is not on the customer. There are other questions that are reasonable to ask – for example, around security of data and justification for storage costs – but these can easily distract you from the opportunities that exist around that data. Discussing these questions can easily lead your teams down rabbit holes.
You will likely be better off solving exactly the governance and security questions you need to in order to deliver one specific, new data-driven experience to customers in the next quarter, and then the next quarter after that, in turn, versus trying to solve them in the abstract. Because those new experiences will themselves generate data, if you ship faster, you will learn faster. This is a new way of working for many, but getting this flywheel spinning is the key to staying ahead if you’re starting ahead–or stealing a march on competitors who don’t realize its importance.
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