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 2018-1 study.
Results valid through December 2018

Phoenix-Hecht Postal Survey™ Executive Summary

Numerous Improvements Dampened by Two Large Deteriorations

As we expected, the United States Postal Service delivered a remittance mail Postal Survey™ dominated in frequency by national and regional improvement versus the fall 2017 survey. This seemed likely given the transportation network and plant staffing challenges prevalent in that October time period. It also seemed likely given the level of USPS focus upon remittance operations in early 2018. Net improvements, however, were impacted both regionally and nationally by the unexpected and significant deterioration experienced by eleven participants in Chicago and Cincinnati.

About six in ten participants (60%) experienced national delivery hour decreases averaging just over three and a half hours. Only one in four participants (25%) experienced national deterioration, but it averaged five hours. Three participants in the Northeast experienced minor deterioration, but all participants in Chicago and Cincinnati who were included in both the fall 2017 and spring 2018 surveys experienced at least 5 hours deterioration. Oddly, our single participant using the Palatine, IL (suburb of Chicago) USPS plant had national hours improvement. Overall, the participants with mail hour improvement gained 0.12 days in mail float, while those with hours deterioration lost 0.20 days. Thus, the average participant gained just under an hour in mail, but insignificant amounts in mail and deposit availability days.

Regional results echoed national ones. Fifty-five percent of sites, slightly fewer than for national, had improvement averaging just over 3.5 hours and 0.13 days. Again, about 25% experienced deterioration averaging over five hours and about 0.22 mail days. The average participant thus also gained about two-thirds of an hour in mail regionally, but insignificant mail float and availability float days.

Locally, sites divided almost evenly for improvement, deterioration, and no change. However, improving sites averaged about four hours gain while deteriorating sites had less loss, just over 2.5 hours. So, the average participant had about two-thirds of an hour gain with no significant float day change.

Caller Handoff Metric

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 almost 60% of participants. About a quarter of participants enjoyed an improvement in this measurement versus about 15% with deterioration. 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. The survey median handoff was 9.2 hours, only fractionally better than the previous survey. The mean also improved only fractionally to 10.8 hours.

USPS is continuing 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. But the handoff, the equivalent of final mile delivery to residential addresses, continues to be an area with improvement opportunities. These will become more important as corporate interest rates rise as planned by the Federal Reserve.

Can the Cycle be Broken?

We have now had two straight years where deterioration occurred in the fall survey, followed by improvement in the spring survey. The fall season, particularly late October, presents particular challenges to USPS since it is a period of heavy Christmas catalog mailing, has election mail challenges in certain years including the upcoming one, and last year fell after three major hurricanes that caused substantial disruptions. We feel virtually certain that the USPS will be strongly committed to providing a survey that surrenders no ground, but it will be extremely interesting to see how successful they can be.


The 2018-1 Phoenix-Hecht Postal Survey ™ had widespread improvements, with thirteen cities gaining two or more hours in national mail performance. Indeed, about 60% of sites enjoyed national mail improvement against only a quarter of which experienced deterioration. Deterioration was also concentrated in only two cities, Chicago and Cincinnati. Unfortunately, deterioration in those two cities was very significant and dampened overall survey improvement to less than an hour. Regional mail performance echoed national. The final step in remittance delivery, movement from the plant floor sorting equipment to the caller area for courier pickup, has been a key focus for the U.S. Postal Service. As measured by the survey’s Caller Handoff Metric, 25% of sites had less delay in that process against 16% having more. There were small improvements in both the median and average caller handoff.

USPS continues to improve its capabilities to monitor delivery performance. Two scan events are being added in important remittance plants which will greatly assist USPS monitoring of remittance caller delivery. Most importantly, remittance performance in its entirety, from induction to delivery to the processor’s courier will be coming under USPS data monitoring. There is every reason to believe this will be beneficial for remittance mail performance. The immediate challenge for USPS will be to deliver a fall remittance survey which does not surrender the spring survey’s gains.

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 and early May 2018, measured mail from 170 originating cities into approximately 60 sites in 25 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.

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.

Float Factor Tracking
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.

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

Retail Lockbox Processing Service Providers

Listing of retail lockbox processing service providers from, "the premier web site for locating news, information, vendors, services and products for electronic and paper based transaction processing".