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Remittance Processing
Wholesale Retail
In-House
Remittance processing can take various forms depending on the
remittance size, return documents, and volumes. This topic section
was designed to give the corporate treasury manager an overview
of the various components which comprise the service, along with
performance measures and other items of interest.
USPS Remittance Mail web site
Current issues in remittance mail
Extracts from Business Mailers Review
Complex Payments
Bob Murphy
Vicor
December 2005
Remittance Processing Providers by Location
Wholesale
Service Providers
Requests for Individual Provider
Postal Survey Performance
Latest Postal
Survey Trends
Results of the 2010-1 study.
Results valid through January 2011
Homogeneity Without “Certification”
The July 2006 report from the Remittance Mail Advisory Committee to the USPS contained a recommendation that “significant Postal remittance processing facilities be certified” for adherence to best delivery practices. Industry, particularly national network processors, encountered delivery variations across Postal facilities and felt that “certification” would require best practice adaption and increase delivery consistency. USPS certification was proceeding into November 2008, but then derailed against the higher priorities of Tour 2 Consolidation, 5-day delivery conception, flat sequencing deployments, and Network Distribution Center implementation. The 2010-1 Spring Phoenix-Hecht Postal Survey™ , however, shows evidence that the homogeneity hoped for by industry is being achieved without formal certification.
For national mailing in the 2010-1 survey, 41% of repeating participants enjoyed delivery improvement averaging almost 3.5 hours. 28% experienced deterioration averaging a lesser 2 hours. Overall, then, the average participant enjoyed delivery improvement approaching one hour (0.8 hours). This improvement to the average participant offset the net deterioration experienced during the Tour 2 Consolidation period and restored the survey to a net 8-hour advantage versus the spring survey of 1999 (the reader is cautioned that this improvement is calculated from the “average” participant’s perspective repeating one survey to the next).
 
Upon closer inspection, the survey presents a more subtle revelation. There was more improvement in sites with 50 or greater national hour average than in sites under that performance level. This “50 hour” performance is a somewhat subjective delineation of “excellent” performance. In this survey, 61% of repeating sites achieved this. It is chosen as a demarkation of significantly exceeding USPS standards for First Class delivery (next day, two-day, three-day, etc.). These sites reach excellence by receiving delivery of significant mail volume either the evening prior to “committed” USPS delivery or very early on the “committed” delivery day. In the survey, among better performing sites (under 50 hour national average), 31% experienced “better” national delivery versus an approximately equal 30% with “worse”. For sites with averages 50-hours plus however, 56% enjoyed “better” delivery versus only 26% “worse”. Moreover, 10 of the 11 sites with 4 or more hours improvement (cited on page one) fell into the 50-hour plus category. For improvements between 2 and 4 hours, the distribution of improvement matched the category populations, i.e. about 40% were in the category 50+ hours, matching their overall survey population percentage.
Can This Remittance Mail Performance Continue?
The USPS has submitted its official 5-day delivery plan to the Postal Regulatory Commission. As was reported in the last Executive Summary, delivery-only operations at plants will continue Saturday evening and Sunday morning using reduced staffing. While this will not change the impact upon consumer payments that do not originate on Saturday after program implementation, business-to-business payments collected in lockboxes will have any impacts greatly mitigated.
Falling mail volume is dictating reductions in processing capacity, but it is doubtful that current significant remittance processing facilities will be among those impacted. USPS diagnostic capability involving remittance mail address delivery is actually slated for improvement via an internal Mail History Tracking System driven by the unique phosphorescent identifier sprayed on the back of envelopes at the origin processing plant. Oddly, the greatest threat to remittance mail performance likely comes from the Network Distribution Center project, which will greatly improve ground transportation efficiency and loading by combining classes of mail onto common transportation. It will result in a greater percentage of First Class mail, and remittance mail in particular, that travels via ground versus air. For privileged mail recipients, particularly wholesale lockbox processors with unique or “range unique” zip codes, air transported mail tends to beat delivery
standards significantly. Ground transported mail to these recipients cannot, as it behaves more like “just in time” inventory. The USPS currently projects perhaps another two years before full NDC integration, so the impact to remittance mail is still somewhat off in the distance.
While it is gratifying to see the clustering of city receipt performance under 50 or even 52 hours nationally, the industry still has some reasons to want the Certification project to restart. In the Phoenix-Hecht ® survey, there are three plant locations that do the majority of remittance mail sorting but the processors do not get caller access at that location. In each instance, the “handoff” metric of the survey is sub-optimal. Likewise, there are still instances where USPS Confirm data indicates that plant sort operations get ahead of caller delivery operations. And there continue to be a few locations where round-the-clock access is not a reality. Adherence to best delivery practices can still produce additional benefits to remittance mail performance.
Individual bank results are available from participating processors
or can be requested from this web site.
The Postal
Survey is the leading independent mail time survey for the treasury management industry. This survey, conducted in late April 2010, measured mail from 170 originating cities into approximately 100 sites in 29 destination cities. For purposes of the executive summary, Phoenix-Hecht® publishes results based upon all originating mail (national) to a receiving site or city, mail originating from the receiving site’s or city’s region (approximately one-quarter of the nation), or mail from the six to ten originating cities closest to the receiving site or city (local). Individual originating city results are weighted by population to achieve each of the “regional” results (national, regional, and local). Mail hours and mail days do not directly correlate since mail days are stated as banking days dependent upon ledger credit.
Methodology
used to conduct the Phoenix-Hecht Postal Survey
Postal Survey is an objective, carefully monitored,
statistically validated measurement of total float in a remittance
collection system. Postal Survey results are calculated using statistical
techniques designed to simulate the corporate lockbox experience.
Lockbox location site
selection technology
White paper describing the use of The Collection
Model and affiliated databases Product Usage
The use of wholesale lockbox service has been relatively
stable over the past few years. Historically, wholesale lockbox
was considered a "large corporate" service but companies
of all sizes can realize important benefits from the service.
Service Pricing
The pricing of wholesale lockbox services is
generally quoted in an unbundled fashion because of the variations
of processing requirements. On a standardized account analysis service
code 050100 represents the per item cost of processing the check
and invoices received in a wholesale lockbox.
Blue Book of Bank Prices Executive
Summary
Actual prices paid for the most common cash management
line items
Order your copy of
the only compilation of actual prices paid by corporations for services.
Remittance Math
Simple calculations from an account analysis
and bank statement over time can detect increasing or decreasing
float performance. A company should track monthly such figures as;
average daily float, average collected balances or average float
as a percentage of ledger balance (account being monitored should
only contain lockbox activity). Over time an acceptable level of
float should be experienced if all systems are functioning properly.
Observations outside the norm (either above or below
average) indicate a need for further investigation. Points above the established norm can be an indication of major
deposit deadlines being missed due to delayed mail or a problem in processing. Points below the established norm
may indicate a backlog of processing being held until the next day.
Average Days to Collect
Mail Time Measurements
An explanation of the factors that can cause
differences between mail time as measured by Phoenix-Hecht and mail
times observed in a lockbox study.
Importance of wholesale lockbox features
Quality Trends
Phoenix-Hecht Quality Index
The Phoenix-Hecht Quality Index is a statistically
valid comparison of customer perceptions about bank performance.
BAI Quality Measures
The BAI quality measures are an indication of
the relative production error rates experienced in the banking "factory."
This white paper explains the measurement process.
Measuring Modeling and Monitoring Your
Lockbox
An in-depth discussion of how mail moves through
the postal system, how mail times and availabilities are measured
by Phoenix-Hecht, how to recognize the need for a lockbox study,
how to approach doing a lockbox study, and how to monitor your lockbox
performance. Booklet is 50 pages. PDF file has an index.
Image Processing
The utilization of digitalized image processing
can improve receivables processing by routing documents electronically
for clarification to resolve exceptions, locate specific payments
quickly to apply cash and approve credit, and reduce paper storage
costs.
Imaging
is the creation of a digitalized picture of an object such as a
check or invoice which can be displayed, enlarged, annotated, duplicated,
stored, routed or indexed for future use. In a lockbox environment,
imaging is used to capture pictures of checks, envelopes, invoices,
remittance advices and correspondence.
Images courtesy of Bank of America
Most
image based systems can be delivered via the Internet or on a CD-rom.
Companies should work with their bank to develop an imaging strategy.
To get the most benefit from the investment, internal work flows
may need to change.
Retail
Retail Service Providers
Requests for Individual Provider Postal Survey Performance
The cost of processing retail remittance, while
driven primarily by transaction fees, also has a float impact that should not be overlooked. In a wholesale lockbox,
float benefits have long been easy to measure. Until recently, float has been difficult to quantify for a retail
remittance processing site. Phoenix-Hecht, best known for its Postal Survey (a semi-annual study of wholesale lockbox
times), also provides an analysis of retail mail float for corporations
The Retail Mail Analysis
has total float times based on difference processing scenarios.
As a guide a corporation should use a higher processing assumption
for larger volume lockboxes.
ARC or Check
21 to Collect Payments?
A white paper by Phoenix-Hecht
Is ARC a Good Collection
Method For My Company?
A white paper from J. William Murray, eBusiness
Executive Professor,
Towson University, Towson MD
Electronic re-presentment
of returned checks
Any firm that accepts checks in payment is eventually faced
with trying to collect on a "returned item".
Pricing
In-House Processing
Hardware & Software Providers
Retail Lockbox Processing Service Providers
Listing of retail lockbox processing service providers from TransactionDirectory.com, "the premier web site for locating news, information, vendors, services and products for electronic and paper based transaction processing".
Blue Book of Bank Prices Executive
Summary
Actual prices paid for the most common cash management
line items
Order your copy
of the only compilation of actual prices paid by corporations for services.
Outsourcing Service Provider Directory
Compiled by The Association for Work Process Improvement
Click here to request your FREE copy of the 2009 directory.
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