A cheque is a document that tells a bank, credit union or building society to pay you money from another person’s account. A cheque can bounce if a customer’s account doesn’t have enough money to cover the payment. Cheques can also bounce if there are other problems, such as suspected fraud. If a cheque bounces, your business won’t get the money.

Read the Legal Services Commission of South Australia’s Cheques page to learn about cheques.

Benefits of cheques

Cheques can have some advantages over other payment methods. Check out the following examples:

  • Less risk of theft than cash

    It is not a good idea to send money through the mail, since people can steal it. Cheques are harder to steal than cash since only the person who is on the cheque can receive the funds.
  • Preferred by some customers

    Some customers may prefer paying using cheque.
  • Proof of payment

    A cheque provides proof of payment. This can help avoid disputes.

Disadvantages of cheques

Cheques are a traditional payment method with higher costs than electronic payment methods. Have a look at these examples:

  • Higher labour costs than electronic payment methods

    Cheques increase labour costs. To bank them, you have to pay people or spend time. They also increase bookkeeping costs because you have to keep track of the debt, when a cheque is received and when you bank it
  • Debt collection costs

    Since cheques can bounce, there can be debt collection costs. Read our Debt collection services page to find out more about debt collection services.
  • Lost time compared to electronic payment methods

    Cheques are slower to process than electronic payment methods.
  • Higher risk of bouncing compared to money orders

    Money orders are prepaid and so have less risk of bouncing than cheques.

Processing cheques

Check out these steps for an example of how to process cheque payments:

  1. Record a customer’s debt after you accept a customer’s offer to buy your goods or services. You can send an invoice to let your customers know how much your goods or services cost. Read our  page to learn more about invoices.
  2. Receive the cheque from your customer. It is okay to receive cheques in person or by mail.
  3. Give the cheque to your bank, building society or credit union. Sometimes, you have to show identification when you hand in the cheque, such as a driver’s license.
  4. For Australian cheques, wait around three business days for the cheque to clear or bounce. International cheques can take longer.
  5. If the cheque bounces, let your customer know and request payment again. Read our Debt collection services page to learn more managing unpaid debts.
  6. Provide your customers with a receipt or a GST tax invoice if they request one. If GST applies, you have to provide a GST tax invoice within 28 days if your customer requests one.
  7. If the cheque clears, record that your customer has paid their debt.
  8. If you have not already done it, deliver the goods or services to your customer.

Tips when allowing cheque payments

Try these tips if you want to allow cheque payments:

  • Use cheque instead of cash through the mail

    Cash is vulnerable to theft if you send it through the mail. Cheque has less risk of theft, since only authorised people can process them.
  • Offer cheque payments if your customers want it

    Letting customers pay by cheque if they want it may increase sales volume.
  • Follow up bounced cheques if it’s worth it

    If a cheque bounces, you can request payment by sending your customer a letter, email them or giving them a phone call.

More information

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