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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 2007-2 study.
Results valid through July 2008

Gains Hold in Stable Survey

The 2008-1 Phoenix-Hecht Postal Survey, conducted in late April, produced little in the way of trends. But that was good news for remittance mail whose performance had improved dramatically in the fall 2007 survey.

Since 2001, spring surveys have usually produced performance improvement. Oddly however, the last two have not. Perhaps this spring survey can be “forgiven” in light of the impressive and unexpected gains the previous fall.

Although only twenty-two percent of recipients improved nationally versus the previous survey while a third had some deterioration, average receipt of mail was within a fractional hour of the previous survey. Regionally and locally, sites were distributed more equally between improvement, deterioration and no change, so average receipt of mail was likewise unchanged. Total float days, the more accurate measure of remittance mail performance, remained statistically unchanged in all three geographies.

Survey Observations. We ended our last executive summary, “…the 2007-2 Postal Survey showed impressive and historically contra-indicated fall delivery improvement. The level of improvement in fact begs for the next survey to either confirm or refute its sustainability”. The 2008-1 survey confirms the improvement. Despite economic turbulence, there appear to be no short-term indicators of anything but continued strong performance for advantaged remittance mail.

As yet, the industry cannot judge whether the Remittance Plant certification program will bring more uniformity and focus to the highest volume remittance delivery facilities in the country. Confirm data, used within the Postal Survey, does seem to indicate that there can be some improvements made to the coordination of plant sorting and caller box access and delivery. A Remittance Mail Advisory sub-Committee, as well as individual Postal Survey participants, will be monitoring developments in this area.

Longer term, the impact of the Postal Accountability and Enhancement Act, which limits postage increases to CPI for market dominant products, and shrinking First Class mail volume, undeniably exacerbated in the recent economic climate, will create a financial reality within which service must conform. As much as the industry is reluctant to acknowledge this, remittance mail receives “premium” service levels which create non-compensated expenses. Given three wishes, the industry might be wise to use one asking for sufficient postal economic stability to retain existing service levels.

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 2008, measured mail from 170 originating cities into approximately 115 sites in 31 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.
Wholesale Lockbox Usage

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.
 
Service Pricing Chart

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.
Float Factor Tracking
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
Float Factor Calculation

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
Importance of Wholesale Lockbox Features Chart
Quality Trends

Phoenix-Hecht Quality Index
The Phoenix-Hecht Quality Index is a statistically valid comparison of customer perceptions about bank performance.

Speed of Processing

Accuracy of Processing and Reporting

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

Request Retail Mail Times

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.

Payment Processing Basics
provided by Creditron

  • Why Automate Remittance Processing?
  • Manual Process Workflow Diagram
  • Single Pass Automated Process Workflow Diagram
  • Dual Pass Automated Process Workflow Diagram
  • Sample of OCR & MICR fonts
  • Sample Scanline
  • Scanline Recommendations
  • Sample Checkdigit Calculation

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
 
Unencoded Checks Other Fed TMA 100224

In-House Processing

Hardware & Software Providers

RT Lawrence Corporation
www.rtlawrence.com
Metavante Image Solutions
www.metavanteimage.com
BancTec
www.banctec.com
Creditron Corporation
www.creditron.com
Deluxe Electronic Payment Systems
www.deluxe.com
J & B software
www.tmsimage.com
NCR Corporation
www.ncr.com
Wausau Financial Systems
www.wausaufs.com

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 2007 directory.