Birmingham Council to save £300,000 by paying suppliers electronically

This is a news release issued by Birmingham City Council, indicating it will stop paying suppliers by cheque in order to save money.

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Savings of at least £300,000 are forecast by Birmingham City Council – by simply stopping the payment of its bills to suppliers by cheque in favour of the widely-used BACS system.

At present the council issues in the region of 350,000 cheques annually but they cost roughly four times as much as BACS – the electronic method most well-known as the way in which salaries are paid directly to people’s bank accounts.

BACS payments are estimated by the council to be 85p cheaper per transaction than cheques and as a result the council will cease to make payments by cheque from the start of the next financial year in April.

This move will bring a saving of £300,000, but to ensure that the needs of the vulnerable are protected, the council has confirmed groups such as benefits claimants, foster carers, asylum seekers will continue to receive payment in the same way as they do now.

Cllr Randal Brew, Cabinet Member for Finance, “As has been widely reported, the council needs to make savings of £308million as its contribution towards the reduction of the national deficit – so we need to look at all ways in which we can reduce our operating costs.

“By embracing the BACS technology, that is proven to be reliable, simple, quick and most importantly secure, we will be able to reduce our operating costs significantly while at the same time offering a better service to our suppliers.

“Cheques do have a nostalgic place in many people’s hearts, but their continued use will waste taxpayer money and not help cashflow management for our suppliers in tough times – they are a tradition that we can definitely live without.”

ENDS

Notes to editors – the declining use of cheques

1. Cheque transaction volumes in the UK peaked as far back as 1990.

2. The move away from cheques was initially led by consumers as they adopted debit cards for payments in retailers and Direct Debits for the payment of regular bills.
3. Business use of cheques continued to rise through to 1997 but has fallen steadily since then.

4. The Payments Council initially proposed a managed decline of cheques in its 2007 public consultation on the National Payments Plan.

5. However having considered all the evidence the Payments Council Board has set a target end date of October 31, 2018, for the cheque clearings in Great Britain and Northern Ireland.

6. The Payment Council’s vision for 2018 is that innovation in the payments market has delivered acceptable alternatives to cheques so that personal customers and business users have migrated away from cheques by choice, thereby enabling cost and efficiency benefits to be realised.

7. Nationally, there were 48 per cent fewer cheques issued in 2009 (approximately 1.25 million) than in 2002 (just under 2.5 million).

8. The volume of cheques issued by the City Council fell by 19 per cent when comparing September 2008 to September 2009.

9. As a means of payment cheques are inherently insecure, for the following reasons: they are easily lost or stolen, subject to beneficiary or value fraud and not a guaranteed method of payment.

10. Cheques are an inefficient method of transacting business. In particular they are costly to produce compared to other payment methods, have an associated administrative burden in additional to cheque production, delay dispatch of goods and services, lead to uncertainty on when payment will be credited and are unhelpful in cashflow management.

11. The main benefits of the BACS method of payment include:

Improved cash flow – with BACS recipients won’t have to wait for cheques to clear. Funds are ‘cleared’ on arrival at their bank – unlike cheques, funds paid by BACS Direct Credit can be used on the day they arrive.

Easier and saves times and effort – with BACS, as money is paid straight into their account, recipients no longer have to take or send cheques to your bank or building society.

Safer and more secure - unlike cash or cheques BACS Direct Credit payments cannot be lost, stolen or delayed in the post. Money arrives automatically into their bank or building society account.