“Let us aim to ... become a cheque-free society by 2025.”

In his speech to the Association of Banks in Singapore (ABS), then-Education Minister Ong Ye Kung stated the Singapore Government's aim to phase out cheques by 2025. With the Government promoting e-payments as a better alternative and many companies paying with bank transfers, why are MCSTs still hanging onto their chequebooks?

It’s certainly not because of convenience. Using cheques creates a lot more work - for the Finance staff cutting the cheque, the Council Member who signs it, and the supplier who has to bank it in. In fact, the cost of processing cash and cheques in Singapore was about $2 billion, or 0.5% of GDP as a 2015 KPMG study found.

Image via Straits Times (Photo: ST File)

MCSTs Bear the Cost of Cheques 
Paying suppliers by cheques puts a drag on productivity. It takes time to prepare and sign the cheques and days for cheques to clear. This delays the time taken to update the Payables accounts and close the books. Not to mention how cheques sometimes get misplaced, or the same supplier can get paid twice because of the timing difference.

For MCSTs, the pain is felt indirectly as these tasks are undertaken by the appointed Managing Agent (MA) company. The MA is paid a lump-sum management fee every month to deliver all required services, including managing Accounts Payables. But the MCST bears direct costs such as transport and bank charges (each cheque costs 75 cents), which may exceed $50 each month.

Despite this, MCSTs still prefer cheques. As one Council Member recently told me, “I still prefer cheques because it's tangible and there's no risk of hacking.”

Cheque Payments Are Not As Secure As e-Payments
With scams involving bank transfers very much in the news these days, it's understandable how this perception comes about. But these usually involve scammers fraudulently inducing people to transfer money. The actual safety and security of e-payments were not compromised.

Instead, here's why cheques are not as secure as e-payments:

Manual Processing of Cheques
Chequebooks are not usually in the physical safekeeping of MCSTs and if cheques are drawn up manually, or if Council Members don't keep track of cheque numbers, then there is scope for fraud to happen.

Forgeries Can Happen
Most people associate cheque forgery with attempts to forge the signature. Some past cases, including a famous case with millions lost, have involved such forgeries. Other forgeries may involve changing the amount or payee name after the cheques have been signed.
Delays In Payments Can Lead to Fraud
The payee, or supplier, can usually be relied on to flag out non-receipt of payment and therefore act as an additional check and control. However, with cheques taking several business days to clear, this control measure becomes less reliable.

Why Are e-Payments More Secure Than Cheques

1. Bank transfers are instantaneous with monies deposited directly into the payee’s account.
2. Division of duties when paying suppliers electronically mitigates the risk of employee fraud.
3. Electronic controls such as system-generation of payment instructions further mitigates the risk of employee fraud.
4. Unlike cash and cheques, e-payments have electronic audit trails and banks may be able to help recover funds in certain situations.

Moving Away From Cheques Benefits the Council
It’s hard to quantify cost savings to the MCST from a move to e-payments. The estate benefits indirectly by having more productive staff, but with most benefits accruing to the MA, it's understandable why some Council Members may be reluctant to make the switch. However, if we take a longer-term view, the benefits to Council and the estates become clearer:

• A more efficient MA works more productively for the estate instead of wasting time shuffling paperwork and tracking cheque payments
• Helping suppliers with their cashflows puts the MCST in a better position to negotiate for discounts from term contractors
• Paying suppliers by GIRO is more secure as fraud risks are mitigated by electronic approvals and payment authentication processes
• Request for MA to provide higher value added services like budgeting for asset renewals, cost/revenue benchmarking and asset performance analysis

Mitigate Fraud Risk by Managing Accounts Payables Using a Modern ERP Platform

Qornerstone Estate is a modern, cloud-based ERP platform that allows MCSTs to digitalise their workflows entirely. Council Members can approve supplier invoices electronically with their own account login, which gives them greater visibility on past supplier payments, and the ability to view supporting documents and invoice approvals history. Once invoices are approved, the Qornerstone system generates GIRO payment instructions without further manual processing for greater security. Contact sales@qornerstone.com to learn more or fill up the Contact Form below.

Image via Straits Times (Photo: TODAY File)

Businesses big and small have been eagerly signing up for Corporate PayNow – according to this article from Today Online.