Plans to axe the cheque by 2018 should be brought forward to reduce the number of businesses struggling with late payment, the British Chambers of Commerce (BCC) has said.
The comment follows a survey which questioned around 5,000 businesses and found that the majority (85 per cent) are paid via BACs bank transfers, with 95 per cent of firms reporting it as their preferred method of payment.
Conversely, two thirds of businesses are paid by cheque yet only a fifth prefer being paid in this way.
Unlike bank transfers which are usually processed instantaneously, delays in transfers as well as 'bounced' cheques can cause further delay for businesses already receiving delayed invoice payments.
The UK Payments Council last year decided to phase out the use of cheques by 2018 after lobbying from business groups, but the BCC argues it should be brought forward.
"While many businesses still use this method of payment, it can have negative effects on other businesses' cashflow," the BCC said.
"However any changes should only happen if businesses are not financially disadvantaged by the extra fees that can come with additional forms of payment such as internet banking transfers."
Cashflow issues stemming from late payment is a major problem particularly for smaller businesses. Yet over a third of businesses admit to late payment themselves due to the 'domino effect' of cashflow issues; a third said they could not pay suppliers until they had received payment from their own customers.
The BCC's survey found that 94 per cent of businesses have been paid late, with nearly one in four (24 per cent) saying that 40 per cent of their bills are now paid late. A third of businesses reported that most customers were paying late after the down turn in 2008.
Elsewhere, research from the BACs Payment Schemes Ltd, the company behind Direct Debit, said that a million businesses are suffering from late payment of bills, with a collective debt reaching £36.4 billion.
As well as calling for an accelerated end to cheques, the BCC said a kitemark scheme to asses and acknowledge prompt payers should be brought in, in addition to electronic invoicing.