New bank cheque clearance rules will help small businesses

For the first time, after paying in a cheque, business owners can be sure that at the end of six working days, the money has safely cleared and they are protected from any loss if that cheque should subsequently bounce.

The changes, which came into force on November 30th, set maximum timescales for the day that customers can expect to earn interest, or when the balance on which overdraft interest is charged is reduced (no later than two working days after paying in a cheque).

They also set maximum timescales for the day when money can be withdrawn (no later than four working days after paying in a cheque).

Commenting on the implementation of these '2-4-6' changes, Len Collinson, the FPB's National Chairman said:

"For the first time, smaller firms have been assured that their money will be safely in their accounts within six working days. This will enable them to be more assured in managing their cash flow with a far greater degree of clarity."

Many small businesses still receive payments by cheque. Often the apparently simple process of paying in cheques and then keeping track of the money in their accounts can prove to be a difficult and confusing process.

The changes are part of the new Banking Code, which is being fully implemented in March 2008, and will be monitored by the Banking Code Standards Board.

To explain the changes, the Cheque and Credit Clearing Company and APACS have issued downloadable advice guides and a range of information for personal and business customers, available free from their websites, www.chequeandcredit.co.uk and www.apacs.org.uk.