Payment methods - cheques

Clearing system

For information about the cheque clearing system, read the information below.

Cheque clearing system on a day-by-day basis

Day 0 (today):
RFashion has a cheque to bank from Desmond. Once the details have been recorded in the cash book, a
paying-in slip is completed and the cheque submitted to the bank. The receiving bank will stamp the
cheque with their name and address, and place it in the pile with other cheques from the paying bank. By
the end of the day the bank will have sent the cheque to their clearing centre. Every cheque received by all
the branches of the bank will be sent to the clearing centre to be processed.

Day 1:
RFashion’s cheque will be processed by the clearing centre. The details will be sent to Desmond’s bank on
a secure network. The sort code is used to determine where the details should be sent. The sort code is
unique to each bank. The secure network has a number of security features to ensure that fraudsters
cannot access the information.

The physical cheque will also be sent to the issuing bank (Desmond’s bank) via an exchange centre.

Desmond’s bank will receive the online data and check it before preparing to pay the amount to RFashion.
They will be doing this for all the cheques that they have received.

Day 2:
All the banks in the clearing system will pay each other the amounts that were entered into the system the
previous day. In England this is done under the supervision of the Bank of England. Its duties as the
Bankers’ Clearing House have been devolved. At this time clearing banks have not been able to ensure
that all the cheques are payable, but they do the transfer of funds anyway. The system would take much
longer if they waited for that check to be done.

By the end of the day, the check will have been made to ensure that Desmond had the funds to pay the
cheque.

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If everything is correct, then RFashion will be entitled to the money and the deducted amount will show on
Desmond’s account.

If Desmond’s bank decides it will not pay the cheque to RFashion, then the unpaid cheque will be returned
to RFashion’s bank by courier. This must be done very promptly, so that the recipient can be informed
about the returned cheque and the reason for it being returned. Reasons will include there not being
sufficient funds in the account, it is incorrectly completed, or if it is fraudulent in any way.

Day 3:
RFashion has to wait until tomorrow to access the funds.

Day 4 & day 5:

RFashion can now use the funds from Desmond’s cheque.

Day 6:
The funds now are definitely safely in RFashion’s account and cannot be removed, providing there has
been no collusion in a fraud between RFashion and Desmond.

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