As a Board Member sitting on currently three non-profit entities, I have come across many interesting situations with regards to financial and operational processes.
One of the most common situations involves the use of manual cheques for payments. Before the pace of digitalization accelerated due to the pandemic, organizations large and small have already been moving onto the digital payments bandwagon albeit at different speeds. Larger organizations with higher revenue and payments transaction volumes were quicker to move towards this trend due to cost and manpower savings from the reduced administrative work involving the preparation, issuance and signing of manual cheques for payments.
Smaller organizations were sometimes forced by the rapid advances in technology to adopt digital methods of payment not by choice but by the banks themselves.
One of the entities which I serve as a board member used to process salary payments using an off-the-shelf stand-alone HR & Payroll package that saved the salary crediting GIRO file into a physical 5.25 inch diskette. I believe many of the generation Z and alpha would never have physically held such secondary storage media in their hands. The entity’s finance staff would put the diskette into an envelope and couriered it to the DBS bank for processing every month.
After many years of sending the salary credit GIRO file to DBS, the bank sent us a letter one day telling us that they were going to cease this service due to low demand and asked us to switch to DBS IDEAL their electronic banking internet based solution.
Hence, the entity was forced to switch to DBS IDEAL. I took the opportunity presented by the bank to switch over the payments and payroll to DBS IDEAL then. This was because I used to co-sign cheque payments to vendors every month to the tune of close to 50 or 100 payments every month.
The use of manual cheques presents a higher risk profile to the organization because cheques can be forged, the traceability of who presented the cheque and which bank account received the funds was more difficult to check and verify. This article from the Straits Times reminds us that cheque forgery, as compared to fraud using internet banking, is more common and easier to do.
Even though internet banking is both ubiquitous and available, many smaller entities still rely on manual cheque payment methods partly due to inertia and a reliance on tried-and-tested methods. But what they do not understand is that the reliance on manual cheques is still a high risk area that exposes organization to unnecessary risks of fraud.
If you are involved with or know of entities that continue to use manual cheques for payments, do consider advising them to switch to internet banking. I have helped one of my entities where I serve on the board to do the transition. A lot of the effort is in change management for the staff. The staff who process the payments tend to be the ones that need convincing that in the long-term, electronic payment methods are both efficient, effective and provides for enhanced governance to mitigate the risks of fraud.
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