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Business association for Latin American Studies Conference, Rio’97
Rio de Janeiro, 1997 – Proceedings of BALAS, v.2, p. 869
THE PRE-DATED CHEQUE MISTAKABLE: CONSIDERATIONS ABOUT
A REGIONAL “POLICY” OF CREDIT IN A GLOBAL CONTEX
Francisco Giovanni David Vieira1
Márcia Maria dos Santos Bortolocci2
ABSTRACT
The paper intends to present the thesis that brazilian companies have commited a
mistakable in accepting the pre-dated cheque as way of credit payment.
Introduction
The present paper results from lengthy observation about a pratice of “policy” of credit very
popular nowadays in Brazil, which concerns to pre-dated cheque - a kind of cheque that will be
cashed in any time in the future (a week, month,... ), as guarantee of payment. After a soon
scenery characterization of the pre-dated cheque utilization in Brazil, in the way of considerations
through notes, where is evidenced the contradiction of a regional “policy” of credit in the face of a
global context, it intends to present the thesis that brazilian companies have commited a
mistakable of considerable proportions in accepting the pre-dated cheque as way of credit
payment in their quotidian.
Scenery
The actual inset of the brazilian economy in latin american context still has some unknown or few
explored characteristics. The Brazil has a population of 150 millions of people, whose almost 50%
represents its active economic population (PEA) and the brazilian gross national product
increased 8,2% in the the two last years3.
However, the number and the way like a great part of the business are realized in Brazil, it
deserves attention from the academician and the business men. It refers to the pre-dated cheque
1 Professor and researcher of Management Department of Paraná State University of Maringá (UEM), Brazil.
2 Graduating student in management of Paraná State University of Maringá (UEM), junior researcher of CNPq and
technologist in data processing by Higher School Center of Maringá (CESUMAR)
3 Data provided by IBGE (Brazilian Institute of Geography and Statistics) database, 1996.
use on time purchase. Almost 60 thousands of sale points scattered in Brazil deal with pre-dated
cheques. This fact shows the importance that this type of payment has in brazilian economy.
In order to illustrate this situation some data about the use of cheque in Brazil are extremely
significatives, such as: a) the compensated cheques total in Brazil became 344 millions in 1994
and 280 millions in 1995 - less 18,6% from one year to another; b) the average value of emited
cheques in Brazil was US$ 308.90 in 1994 and US$ 578.15 in 1995 - more 87,1% from one year
to another; c) the emited cheques sum value in Brazil was US$ 1,14 trillions in 1994 and US$
2,02 trillions in 1995 - more 77,1% from one year to another (Figura 1). Although all that
numbers, there is other indicator which is synonymous of economic and financial problem: 24
millions of deptors cheque, since march 1990, were given in order to buy or to pay something in
Brazil4.
Figure 1 - Comparative Data from years 1994 and 1995 concerning to the use of cheque in Brazil.
Considerations
01. The basic administrative principle that guides each and every policy of credit payment falls in
the necessity in amplifying the realization horizon in the company’s business and concerning
4 Data provided by Folha de São Paulo newspaper database, 1996.
1994 1995
0
1
2
3
1994 1995
Compensated Cheques in Brazil
(in 100 millions)
1994 1995
0
2
4
6
1994 1995
Average Value of Emited
Cheques in Brazil (in US$ 100)
1994 1995
0
1
2
1994 1995
Emited Cheques Sum in Brazil
(in US$ trillions)
to the effort in increasing the possibility of products and/or services acquisition by the
consumers. In that manner, for that reason, the credit concession has as final purpose to
proportionate satisfaction in the relationship established between the company and its
customer.
02. At that rate, and in the face of the fact that great part of the brazilian companies use the pre-
dated cheque as way of credit payment, it behoves to ask about who does win with its
utilization? Do the company and the consumer win, does only the company win, only the
consumer, the society as a whole, nobody, or all win and lose, in any way and at the same
time? And, worse than ever, if all win and lose, win more than lose or lose more than win?
The bets can be done, although the last question is the one that pays better, specially in
medium and long-term!
03. Since that internationally was known the Cheques Uniform Law, by means of the Genebra
Convention realization, in 1931, the cheque is understood as a way of in cash payment.
Adjusted in an economy with too much expressive inflationary historicals, its conceptual
obstacle was crossed over, turning it into pre-dated cheque, that is, just a debt guarantee from
the customer to the company wich conceded the credit5.
04. Considering that the pre-dated cheque came to be a national unanimity, in the decade begin its
acceptance became common as a way of giving credit in on time payment, especially in
relation to the trade6. The businessmen believe, at first, and continue to believe as yet, and
more and more, that to accept pre-dated cheque is synonimous of facility to accomplish sales.
Thinking like that is not incorrect at all; it is only partially incorrect.
05. In fact, the payment with pre-dated cheque is somewhat fast and easy to be done by the
customer and processed by the company. It does not require much information, the company
does not need to dispose a especially department to control the credit and collection, besides
in avoiding expenses with more number of employees and paying books and/or duplicates
emission, among other details related to the on time purchase. As those details are not
enough, there is the chance of proceeding the change and discount of pre-dated cheque in a
factoring and, due to this, increasing indirectly the products liquidity and antecipating the giro
capital, so necessary in economy “stability” and "low" margins of profit periods, as call oneself
exists in Brazil in the present moment.
06. Certainly, in the conceptual and operational point of view, the details refered above do not
represent news for the brazilians and neither for those who are not brazilians participants of
the BALAS Conference (Business Association for Latin American Studies), Rio'97.
5 The law that regularizes the cheques in Brazil is the one number 7.357, which does not contemplate the pre-dated
cheque.
6 An example of this situation is the research done by the São Paulo State Trade Federation (FCESP) on october
1994, which shows that 60% of stores share their on time sales through the pre-dated cheques.
Therefore, there is a question: in what consists the pre-dated cheque mistakable? Do the
brazilian people are more intelligent than other people? Why in no other place it works with
pre-dated cheque so frequently and carelessly7? Because of a cultural affair, or maybe is it
another “brazilian way of getting around it”?
07. The pre-dated cheque acceptance as a way of credit concession and on time payment is a
great fault, not by the deptors risk that has offered, but by the simple fact of refuting basic
principles of financial management, marketing management and economy. In this sense, the
central question is that this fact cause financial, marketing and economy loss, constants and
successives not only for the trade and/or services sector, but also for the other economy
sectors, except for, certainly, the factorings, banks and other financial system agents.
08. In spite of making possible an increase in the sales volume, impacting positively in the
company’s profit (Figure 2), the use of pre-dated cheque as way of payment in a policy of
credit with less restrictives characteristics bring along factors not so much pleasants for the
company’s assets. This fact implicates, for that reason, in deptors loss8 and maintainance costs
caused by the permanence of the cheque in wallet, manifesting the necessity of thinking again
the quality of the policy of credit addopted by the company that concedes it for its customers
by these means.
Figure 2 - Participation (%) in the total invoicing, including in cash sales at Supermarkets of São
Paulo9
7 This practice has been used in Argentina in a regulated way since may 2nd 1995. In spite of this, that practice is
not welcome by argentinian traders yet.
8 It is appropriate to emphasize the inverse proportionality relationship between the variables risk and return, that
is, as much as great is the return caused by a slacken politic of credit, greatter is the loss risk with nonchargeable
owings inserted in this context.
Pre-dated cheques
Credit card from
thirds
Proper credit card
Tickets 7,4
7,3
1,9
2,4
5,7
8,8
38,76 46,6
0 10 20 30 40 50
Pre-dated cheques
Credit card from
thirds
Proper credit card
Tickets
July/1996
Septembre/1996
09. According to data from the research realized by São Paulo’s Supermarket Association
(APAS), for example, almost 90% of this sector companies accepted the pre-dated cheque.
This way of payment corresponds 46,6% of their invoicing, and it caused a damage of 1,18%
because of the deptors, concerning to almost half of the sector liquid profit. In Santa
Catarina, in the period of june to september of 1996, there was a deptors increase from 0,2%
to 0,6%. This situation has repercussions in an evidence worry by the businessmen in this
sense, reflecting the tendency in finishing the pre-dated cheque practice gradually, and for so,
the first step would be the reduction of the time of payment to those who prefer using it.
10. The pre-dated cheque is, therefore, a mistakable in the financial point of view because, in
causing deptors, affects the company’s financial health, burden costs, and contribute to
desgast its image in front of the stockholders, because in last analysis, when the company
concedes credit to a customer, it does not abstain itself from doing a kind of bet on returning
the invested capital in the sold product acquisition - even if this capital is not proper, but from
thirds10.
11. It is important to emphasize, however, that this analysis pass through, certainly, by a
subjective judjement from the businessman himself, who acts according to values and beliefs
inside him, being able to justify the pre-dated cheques utilization by having a great propensity
for risk, or ignoring it on behauf of the return that their use brings.
12. The pre-dated cheque is a great fault in the marketing optical because it makes difficult even
the database creation, with the companies’ customers data, indispensable condition to the
process of faithfulness between them, also the new products presentation or campaigns
promotion through the direct marketing attached to them. The pre-dated cheque practice has
shown that the customers come in, buy and go out from the stores with a minimum
identification possible, as they were, although pleasant, fugacious ghosts.
13. Happenings like this refute frontally a modern marketing strategy that consists of the database
marketing creation, which has conducted many companies in knowing better their customers
and consequently, offering products and services more appropriate to their proper public
particular characteristics and necessities, that implicates in more yield and profilability for the
company. This strategy has facilitate so much the decision taken process and the manager
activities in the companies that addopt it.
14. The greater mistakable, however, in the pre-dated cheque acceptance as a way of conceding
credit and on time payment is that this practice impedes the realization of a greater business
volume in the economy as a whole. This happens because the customer, when buys with pre-
dated cheque, does not need to come again to the company in the day that his/her ckeque will
9 Data provided by São Paulo’s Supermarket Association, 1996.
10 According to the Folha de São Paulo newspaper database, at the first year of Real Plan (brazilian economic plan
provided by the federal government) the number of deptors cheque increased 81,4%.
be cashed, that is, the client does not need to go to the company to liquidate the assumed
commitment with the on time merchandise purchase.
15. In the process of not going out home to liquidate his/her commitment, the customer lets to
consume products or services, whose consumption, through its multiplier effect, can mean
more business and more number of employments. The customer, for instance, does not waste
fuel, tyre, clothes, shoes , does not drink a juice or a draft beer and does not take a snack in
the center of the city, does not be exposed to any impulse purchase, besides does not take
consciousness of the news and promotions of lots of companies, including that one which
he/she let his/her pre-dated cheque.
16. All these facts represent a great mistakable that our companies have commited in this
quotidian and does not serve as analogy whith the credit card, because its characteristics are
very different comparing with pre-dated cheque ones, considering that its use implicate in the
employments creation, besides it converges in the database construction.
17. It intends a retrocession to the suppoosed rationality that involves this practice, objectifying
the commercial opportunities improvement and the optimization of relationship customer-
company in front of the globalization presented in the actual regional market, before it
becomes too late, presenting a scenery where the virtual money and the smart cards are the
dominant reality, requiring a much more complex posture by the organizations in the creation
and maintenance of their most important active, the customer.
18. Therefore, stays openned an horizon for future studies to be developed, maybe by the
commercial associations themselves, subsidized in preceding periods to the incessant practice
of database cheques historical support, verifying the cost-benefit that involves the economy as
a whole, suggesting more productive alternatives of policys of credit concession and
answering the key question: who does win with its utilization? Do the company and the
consumer win, does only the company win, only the consumer, the society as a whole,
nobody, or all win and lose, in any way and at the same time?
Final Sentence
This is the thesis here defended. It hopes that its expression, in spite of evidence the contradiction
of a regional policy in a global context, can contribute to the discussion about the direction and
tendencies that business have assumed in contemporary Latin America.