Money order payments

A money order is a document that tells a bank, credit union, building society or post office to pay you money. Unlike cheques, money orders are prepaid. Money orders can’t bounce due to insufficient funds since they are prepaid, but they can bounce due to others problem, such as suspected fraud. If a money order bounces, your business won’t receive the money.

Benefits of money orders

There are some advantages of money orders over other payment methods, for example:

  • Less risk of theft than cash

    It's not a good idea to send cash through the mail, as it can get lost or stolen. Money orders are harder to steal than cash since only authorised people can process them.

  • Preferred by some customers

    Some customers may prefer money order.

  • Less risk of bouncing than cheques

    Since money orders are prepaid, they have less risk of bouncing than cheques.

  • Proof of payment

    A money order provides proof of payment. This can help avoid disputes.

Disadvantages of money orders

Money orders are not free to process. Check out these examples:

  • Higher labour costs than electronic payment methods

    Money orders 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 debts when a money order is received and if you have banked them.

  • Debt collection costs

    Money orders can bounce, so there can be debt collection costs.

  • Lost time compared to electronic payment methods

    Money orders are slower to process than electronic payment methods.

Processing money orders

Read these steps for an example of how to process money orders:

  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. Find out how to create an invoice.
  2. Receive a money order from your customer.
  3. Bank the money order to your bank, building society or credit union. Sometimes, you have to show identification when bank the money, such as a driver’s license.
  4. Wait around three business days for money orders from Australia to clear or bounce. It often takes longer for international money orders to clear or bounce.
  5. If the money order bounces, let your customer know and request payment again. Read our Debt collection services page to learn more about settling unpaid debts.
  6. Provide your customers with a receipt or a GST tax invoice if they request one. You have to provide a GST tax invoice within 28 days if your customer requests one.
  7. If the money order clears, record that your customer has paid their debt.
  8. If you have not already, deliver the goods or services to your customer.

Tips when using money orders

If you want to offer money order payments, try these tips:

  • Request money orders instead of cheques for international payments

    Debt collection costs for overseas payments can be higher. Money orders have less risk of bouncing than cheques, which can help minimise debt-collecting costs.

  • Use money orders instead cash through the mail

    Sending cash through the mail has a high risk of theft. Money orders are harder to steal since only authorised people can process them.

  • Offer money order payments if your customers want them

    Some customers may prefer paying by money order.

More information

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