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.
Federal Reserve Financial Services
New extended remittance information (ERI) formats allow corporate originators of wire transfer payments to include 9,000 characters of extended remittance information within a wire transfer payment order. The publication explains what the ERI formats are, how they benefit businesses, and offers advice on approaching banks to get started using them.
Requests for Individual Provider
Postal Survey Performance
Results of the 2017-2 study.
Results valid through June 2018
Another Event-Driven Fall Survey
As a reminder, the 2016 Fall Phoenix-Hecht Postal Survey ™ (2016-2) interrupted a trend of two previous improving surveys with about a half-hour of national mail hour increase and about an hour of regional. The very contentious election that was upcoming, coupled with the heavy fall mailing season, created a challenging delivery environment. As anticipated, the spring survey (2017-1) reversed the fall deterioration and seemed to confirm that the election had indeed created an unusual environment. The 2017 Fall Postal Survey (2017-2) seems to demonstrate residual impact from a series of three hurricanes that each greatly disrupted the USPS delivery network.
Roughly two-thirds of participants experienced national hour delivery increases. Only six of fifty-six participants (11%), who participated in both 2017 surveys, enjoyed improvement in national delivery hours. Participants with deterioration averaged over three hours of increase, while the much smaller improving group only averaged about two-hours decrease. This imbalance in both frequency and depth of deterioration over improvement caused the average survey participant to experience just under two-hours national increase. More disappointingly, this means that the aggregate survey change since the USPS introduced the new destination operating window (that seemed so likely to benefit remittance) is less than a half-hour improvement. Fortunately, the national hours deterioration of this survey did not translate into total float days impact, as the average site only lost a statistically insignificant 0.06 days mail and total float. Sites that deteriorated in mail hours, however, were right at statistical significance with a tenth of a day mail float loss.
Regional results had more participants (41%) experiencing no change, but deterioration still greatly outweighed improvement (54% to 5%). Depth of deterioration versus improvement was also closer, with deterioration averaging a little over three hours but improvement averaging just under three hours. Thus the average participant lost about 1.5 hours regionally instead of the nearly two nationally. Again, as nationally, the average participant experienced no statistically significant total float change, but those with deteriorating hours were right at the statistical significance boundary for mail day float loss (0.10).
Local results were more balanced. Roughly a third of sites experienced no change in local delivery hours, while deterioration only outnumbered improvement 41% to 27%. Hours of change were more volatile locally, as improvement averaged four hours against the more frequent deterioration, which averaged a little more than three hours. This greater balance between improvement and deterioration led the average participant to show essentially no change in either hours or total float days. Locally, those with deteriorating mail hours did lose a statistically significant 0.11 days in total float, .09 of which was mail days.
Caller Handoff Metric also Sluggish
The “Caller Handoff Metric”, a measurement from the last sort by USPS until the first sort by the processor to the customer level, was unchanged for 60% of participants. However, twice as many participants experienced some deterioration versus improvement. The processor influences this measurement by the frequency of mail pickups; the USPS delivery plant performs a crucial step in moving the mail from the plant sorting machines to the courier pickup area expeditiously.
Los Angeles was the only multi-participant plant where this measurement improved for all participants. But, disappointingly, the participant with the best national hours and most priviledged remittance address still had double digit hours of handoff. Unfortunately, statistical measurements of the handoff were negatively impacted by the uncharacteristic amount of change in participant mix this survey. The survey median handoff was 9.7 hours, while the mean was 11 hours. By contrast, for sites whose national mail hour performance was sub-50 hours (a Phoenix-Hecht standard for strong national performance), the median handoff was 7.2 hours and the mean was 6.8 hours.
USPS is beginning to develop the ability to monitor the volume of remittance mail finished on the sorter, then staged in the Caller area, and then physically delivered to the processor’s courier. This data can only help the USPS enforce efficient remittance delivery. Obviously, USPS cannot require a processor to align pickups to the plant’s mail availability profile, particularly on weekends. And there are more examples in our survey of less aggressive mail pickup from the processor than Postal inefficiency. We think corporations can get real insight into processor commitment by asking to see the caller handoff metric. There is a real difference in the postal partnership exhibited by a processor with a five- or six-hour handoff metric versus one with a fourteen or greater average handoff.
The 2017-2 Phoenix-Hecht Postal Survey ™ gave many indications of a second straight fall survey impacted by unusual events. Nearly two-thirds of recipients experienced nationwide deterioration, and slightly more than half suffered regional increases. Most disappointing about this survey was that it places the hours’ trend line, starting before implementation of the 2015 Operating Window to now, as being almost flat nationally, while deteriorating regionally. For total float days in the same time period, national, regional and local trends show increases, and the regional days increase is statistically significant. The promise of that 2015 USPS change was more positive than these trends.
There continue to be reasons for future optimism as this summary has reiterated for the last several surveys. USPS continues to improve its capabilities to monitor its internal performance. Those improved capabilities are coming for remittance delivery within the Postal plant. USPS is introducing two scan events in important remittance plants which will greatly assist its monitoring of caller delivery. The last sort operation scan places a piece of remittance mail in a tray all of whose contents are headed to a processor’s courier. The first scan records when this tray is placed on the processor’s container within the caller area. The second scan occurs as the container is given to the pickup courier. By observing the volumes coming off the sorter, getting staged within the caller area, and then getting to each courier pickup, USPS will have the opportunity to better manage the last “three-hundred yards” or so of remittance delivery (remittance’s equivalent to the “last mile” delivery cited by USPS from its carriers to households and businesses). This will give USPS a consistent window into an important piece of what Phoenix-Hecht measures with the Caller Handoff. More importantly, remittance performance in its entirety, from induction to delivery to the processor’s courier will be under USPS data monitoring. This is indeed encouraging.
Individual bank results are available from participating processors
or can be requested from this web site.
Survey is the leading independent mail time survey for the treasury management industry. This survey,
conducted in late October and early November 2017, measured mail from 170 originating cities into approximately 70 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.
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
White paper describing the use of The Collection
Model and affiliated databases
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.
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.
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
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.
Phoenix-Hecht Quality Index
The Phoenix-Hecht Quality Index is a statistically
valid comparison of customer perceptions about bank performance.
Measuring Modeling and Monitoring Your
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.
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
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
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 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.
of returned checks
Any firm that accepts checks in payment is eventually faced
with trying to collect on a "returned item".
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".