Here is some helpful information about the use of cheques and how they are processed by financial institutions.
All cheques must be processed – or cleared and settled – through the payments system. When you deposit a cheque into your account, your bank will send the cheque to the bank of the person who wrote the cheque.
Small and Medium-sized Enterprises (SMEs) often rely on post-dated cheques, thus for a sturdy cash-flow, it is essential that cheques do not bounce.
This assessment may be the ultimate difference in assuring that payments via post-dated cheques are likely to be fruitfully honoured or knowing that the business or person is locally considered untrustworthy or dishonourable.
Post-dated cheques are not the enemy, but the potential risks are, therefore, do your homework and mitigate them with Cedar Rose.
The magnitude of payments via cheques in the UAE is outstanding, there were approximately 12 million cheques in circulation in the first half of 2018, with an estimate of 4% of those that bounced.
Before entering into an agreement where post-dated cheques are used it would be beneficial to know your customer well in order to avoid any financial malice.
However, due to it being a criminal offence, penalisation of bounced cheques may result in a criminal sentence and, at minimum, detainment along with a fine.