What’s a cheque run?
That’s a rhetorical question. I know what a cheque run is.
My question should be: why do you do them? Seriously. Cheque runs are …. stupid. They’re expensive, slow, annoy your suppliers, and completely unnecessary.
At our firm, we don’t own a cheque book. We’ve also never pulled a bank draft, sent an INTERAC e-transfer, paid with cash, uploaded a file to our bank to send an EFT, logged onto CRA to remit GST or source deductions, or entered any information into our accounts payable listing.
Yet we’ve paid all our vendors, employees (well, us – employees coming soon), and CRA on time, and without leaving our desks.
I hope I have your attention, and you’re curious about how we’ve managed this. If you’re thinking we just pay by credit card, you’re also wrong. We do pay for some things with credit card, but not most.
You may have gathered I hate cheque runs. Actually, I hate cheques, period. Let’s look at the entire process of issuing and receiving a cheque.
First, you type in the vendor’s information into your AP listing and decide which cheques to run, and then you hand-write or print the cheques, sign them, stick ‘em in an envelope, apply postage, and finally take them all for a nice walk to the mail box to let our friends at Canada Post spend a whole lot of time sorting them and moving the precious little bits of paper from one location to another. Don’t forget to update your accounts payable listing and monitor your outstanding cheque listing to make sure the payment is drawn from the bank. If (when) a cheque is lost, make sure you don’t issue a new one until you cancel the old one and contact the vendor to find out if the address is still current.
How many steps was that? Somewhere between 10 and 15 depending on which branch you take and the number of errors that occur. Kill me.
What about the other side? The process for receiving a cheque is something like: walk to the mail box and get mail, open all those pesky envelopes and deal with the trash, mark the invoice as paid in your accounts receivable listing, write the details onto a deposit slip, physically take the slip to the bank, deposit it, make sure the deposit reconciles, and finally follow up on any cheques that were NSF.
Another seven steps. Plus all the fossil fuels and trees required to produce and move the paper about.
Now this is a process perfectly suited for the application of lean accounting. There are plenty of methods to make the whole cheque process less time-consuming. For example, you can buy better cheque printing software and equipment, or only do cheque runs once per month. But the real question is: do we need the cheques at all? Lean accounting always starts with eliminating a process before making it more efficient.
Here is the process we use internally, and help our clients set up:
We receive all bills via email. The bills are auto-forwarded directly to a cloud platform called Receipt Bank. Receipt Bank uses Optical Character Recognition to process the bill and auto-posts it to our accounts payable listing in our accounting software (Xero) based on some basic rules we set up.
So far, there has been no paper printed, or any actual human involvement. The first time we get involved is when we approve the bill in Xero.
Our next involvement isn’t until we decide to pay the bill. About once a week, we log into a payment provider (PaymentEvolution or Plooto), click off the vendors we want to pay, and hit ‘Pay Now’. The payment is then withdrawn from our bank account and deposited directly into our vendor’s bank account.
Our accounts payable listing is auto-updated to show the bill as paid, and Xero auto-matches the payment against the bank transactions which are downloaded directly from the bank.
The total labour involved consisted of confirming the OCR worked correctly (it normally does), approving the bill, and clicking the ‘Pay Now’ button. For first-time vendors there may be another couple of clicks to set up rules and input the EFT information in.
On the other side of the transaction, our vendors receive an email that the payment is on the way. They then update their accounts payable listing, and when the funds land in the bank account they reconcile the transactions.
The total number of steps, on both sides, has been reduced from about 20 to a mere six. The process is simple, fast, and largely error proof.
So please, for everyone’s sanity – get with the program. Stop using cheques.