Automation of your Receivables

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Automation of your Receivables

• Valjean Sanchez
• Senior Vice President
• Union Bank of California
• Product Management
• April 27, 2006

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What is Accounts Receivable Check Conversion?

• Payer receives a bill with the disclosure
• Your check will be converted to an electronic
  funds transfer. By sending your completed,
  signed check, you authorize ltltbillergtgt to copy
  your check and to use the account information to
  make a transfer from your account equal to the
  amount printed on the check. (Go through your
  legal department using Regulation E guidelines!)
• Payer sends a check (source document)
• Biller receives the check, images and processes
  the check turning it into an ACH-ARC.
• Biller sends ACH-ARC file to their Bank. Their
  bank processes the ACH-ARC entries and credits
  the Billers account with available funds next
  business day.
• Biller keeps the check no longer than 14 days,
  then shreds it in a secure way.

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What is Accounts Receivable Check Conversion?

• Payer goes to drop a check off in a drop box with
  notice posted
• Your check will be converted to an electronic
  funds transfer. By dropping your completed,
  signed check into the drop box, you authorize
  ltltbillergtgt to copy your check and to use the
  account information to make a transfer from your
  account equal to the amount printed on the
  check. (Go through your legal department using
  Regulation E guidelines!)
• Payer deposits the check (source document) into
  the drop box.
• Biller picks up the check, images and processes
  the check turning it into an ACH-ARC.
• Biller sends ACH-ARC file to their Bank. Their
  bank processes the ACH-ARC entries and credits
  the Billers account with available funds next
  business day.
• Biller keeps the check no longer than 14 days,
  then shreds it in a secure way.

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What is Point of Purchase Conversion?

• Payer writes a check to present over the counter.
• The cashier runs the check through the register
  (maybe imaging the check.)
• An authorization is printed out of the register
  and it reminds us of signing for a credit card
  purchase. The print out reads
• By signing, you authorize ltltCompanygtgt to use
  the account information on this check to make an
  electronic transfer from your account equal to
  the amount printed on the check. and probably,
  We will charge you a for a returned check
  and you authorize us to collect that fee via the
  ACH. (Go through your legal department!)
• Payer signs.
• Cashier returns the check stamped VOID and turns
  the payment into an ACH POP.
• Biller sends ACH-POP file to their Bank. Their
  bank processes the ACH entries and credits the
  Billers account with available funds next
  business day.

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What does an ARC or a POP look like?
It starts looking like a check

2006
Municipality
56.78
Fifty six dollars and seventy eight cents
Water Bill
1234567891551111122222
As an ACH-ARC or POP 6271234567891111122222
5678 155CHARLES CHECKWRITER
0122000491234567
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What does an ARC look like?
As an ACH-ARC or POP 6271234567891111122222
5678 155CHARLES CHECKWRITER
0122000491234567

On Charles Checking Statement (normally under
the electronic section) 1/10/06
56.78 155 Municipality Water Pymt
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Check 21
HR 1474 Text6-05-03Passed House
405-0 6-27-03Passed Senate by Unanimous Consent
7-15-03 An Act to facilitate check truncation
by authorizing substitute checks, to foster
innovation in the check collection system without
mandating receipt of checks in electronic form,
and to improve the overall efficiency of the
Nation's payments system, and for other purposes,
do pass with the following
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What is Check 21 facilitating?

• Check 21 makes a substitute check equal to the
  original check under the law.
• What does this not mandate but enable? Paves
  the way for Image Exchange
• Financial Institutions may reduce dependence on
  transportation.
• Ex. West Coast Bank accepts a deposit of an
  East Coast check. Instead of flying the check to
  East Coast to clear, West Coast Bank images the
  check and sends it to the East Coast. West Coast
  agent prints the substitute check and the check
  is presented for payment.
• Financial Institutions may exchange images.
• Ex. West Coast Bank accepts a deposit of an
  East Coast Bank check. West Coast Bank images
  the check and transmits it to East Coast Bank for
  payment based on the image.
• Financial Institutions may accept image deposits.
• Ex. Your company images checks and transmits
  them to West Coast Bank as a deposit.

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What can Check 21 make my checks look like?

• The Substitute Check ( a term used in the Check
  21 Act) is operationally called an Image
  Replacement Document. An IRD and a Substitute
  Check may not always be equal.
• The substitute check must be machine readable
  (MICR friendly) just like original checks.
•   

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What can Check 21 make my checks look like?
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What can Check 21 make my returns/ deposited
returns look like?

• Original substitute check used for a return of a
  business sized check---front

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What can Check 21 make my returns/ deposited
returns look like?

• Original Substitute Check used for a return of a
  business sized check---back

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What Do Payees Want To Do

• Clear payments in a less costly way
• Collect funds quickly minimizing float.
• Minimize returns.
• Streamline
• Handling of payments
• Posting of payments to Receivables
• Research
• Ensure ease of use for employees and customers
  encouraging acceptance

Check 21 Act
ACH/was check
OTHER TRANSACTIONS
Substitute Documents/IRD
ARC POP RCK
Debit Cards Credit Cards ACH-Web ACH Tel ACH
Recurring
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What can Automation do for you?
1.) Better Control over deposits Multiple
locations deposit Trips to the bank to
deposit Deadlines seem to be extended 2.) Cost
savings Reduction in labor Costs for couriers
Float over time will be reduced Automated
upload to a Receivables System 3.) Improved
handling of deposited returns
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Comparisons
         

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Comparisons
         

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Comparisons
         

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Comparisons
         

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• What about
• Continuing Check Functions
• Receive and process checks/paper returns
• Continue collection process for returned items.
• Expected Reductions
• Savings on forward presentment costs deposit
  preparation, deposit fees and transportation to
  the bank.
• Reduction in customer service costs related to
  check payments, collection fees and check return
  fees.
• Expected increases
• Increases in initial set-up, maintenance of a
  database, customer service training, customer
  service related to ARC/POP/Check 21 Image Deposit
  payments
• New costs for truncating and destroying checks
  and storing images.

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Questions to start the process

• Evaluate your receivables
• Who pays me?
• How do they pay me?
• With what financial instrument?
• What is the timing
• Review how you process receivables today
• Where are my costs today?
• Where can I save if I change?
• Internal costs
• Vendor costs
• Bank fees and float impact
• Exception Processing

What is my volume of eligible items?
How do I target my processing to ensure best
collection rates?
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How can I convert?

• Questions to start the process
• How can I truncate and image the checks?
• In-house processing
• Outsource
• What about image standards?
• If I create an image file, what format do I use?
• How do I sort my ACH from my non eligible ACH?
• How do I address returns?
• NSF
• Administrative?
• How do I address adjustments?

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What else is new?

• EDI made easy!
• New ANSI standard EDI EPN STP 820
• UPIC Enables B2B while reducing fraud
• Universal Payment Identification Code

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QUESTIONS?

• Valjean Sanchez
• Vice President
• Product Management