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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.


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.

Service Providers
Requests for Individual Provider Postal Survey Performance

Latest Postal Survey Trends
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.

The Postal 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.

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

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
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.

Quality Trends

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

Accuracy of Processing and Reporting

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.


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.

Electronic re-presentment of returned checks
Any firm that accepts checks in payment is eventually faced with trying to collect on a "returned item".

Unencoded Checks Other Fed TMA 100224

In-House Processing

Hardware & Software Providers

RT Lawrence Corporation
Deluxe Electronic Payment Systems
NCR Corporation
Wausau Financial Systems

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".