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Automated Remittance Processing: A Checklist of Critical Issues

Follow this 8-point informative checklist to apply customer payments in a timely and accurate manner and improve your Order to Cash process!

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About this course

description
lessonOverview

As detailed in Credit Today's recently-released Technology Buyer's Guide, Version 3.0 on Remittance Processing, applying customer payments in a timely and accurate manner is a key part of the order-to-cash process -- and a great place to cut costs and improve your credit department's productivity.

If you key payments manually into an A/R software module, cash posting can take considerable time. In addition, due to a lack of information, some payments will be posted on the account pending further research (or otherwise tagged to a suspense account or flagged for follow-up). Automated remittance processing systems will greatly reduce the time and labor required to post customer payments and also increase the number of postings that are cleared on the first pass.

First up, let's consider what you should know to do a thorough upgrade of your remittance processing. Here's a checklist of critical issues:

Automated Remittance Processing Critical Issues
 
Pass Fail Component Being Checked
Timely and accurate cash posting
Automatic identification of as many deduction and dispute types as early as possible
The ability to capture and translate customer remittance advice details in order to drive automatic cash posting
The ability to manage multiple payment types
Having a large library of automated matching algorithms
Provides customers the capability of indicating multiple deductions when paying through an EIPP portal
The ability to capture and interpret customer remittance advice details when transmitted separately from the payment in order to update the collection process with promised payments and code the deduction and dispute management system with problem types
Eliminate unnecessary lockbox fees

 

While EDI has been around for quite some time without fully delivering on its promise, primarily due to the complexities inherent in establishing each individual trading relationship, electronic payments are nonetheless growing rapidly. The use of ACH for commercial transactions is growing while the use of paper checks is declining (See "Credit Today Benchmarking Survey: The Latest Data on Cash Application & Remittance Processing"). Moreover, with the enactment of Check 21 legislation, allowing images of paper checks to be used as a substitute check in the clearing process, this trend will undoubtedly accelerate.

Even so, there remain ample opportunities to implement auto-cash solutions, which are usually associated with bank lockbox operations processing paper checks, to address the inefficiencies of manual remittance processing. Until trading partners are able to move to an entirely electronic payment and remittance processing system, the software used to process transactions must be able to address the multitude of exceptions that arise in conjunction with B2B transactions.

This again is the lesson learned with EDI. It is possible to build a system that works with a customer and a vendor, but chances are the vendor can't fully migrate that system to another customer because of the nuances of their trading relationship and their own internal systems.

The beauty of auto-cash is that it teaches us how to handle high payment volumes from lots of customers. This knowledge will be extremely useful as companies add more electronic trading partners. Emerging advances in technology such as the use of XML data tags are providing the flexible structure necessary to easily build data bridges between trading partners. As remittance processing technologies improve, so will your ability to process transactions quickly.


head

Want to start your Digital Transformation Journey today? 

Click here to connect with one of our Digital Transformation Experts. 
instructor
name title image description Ins
Robert S. Shultz Founder, Quote to Cash Solution As a Founding Partner of Quote to Cash Solutions (Q2C) LLC, he provides consulting services in all aspects of the credit and collections process for companies of all sizes in a variety of industries. Robert Shultz has had a thirty-year career as a global credit and financial executive for large multinational companies. As a Founding Partner of Quote to Cash Solutions (Q2C) LLC, he provides consulting services in all aspects of the credit and collections process for companies of all sizes in a variety of industries Shultz has had a thirty-year career as a global credit and financial executive for large multinational companies. As a Founding Partner of Quote to Cash Solutions (Q2C) LLC, he provides consulting services in all aspects of the credit and collections process for companies of all sizes in a variety of industries. Robert Shultz has had a thirty-year career as a global credit and financial executive for large multinational companies. As a Founding Partner of Quote to Cash Solutions (Q2C) LLC, he provides consulting services in all aspects of the credit and collections process for companies of all sizes in a variety of industries.
   

About this course

description
lessonOverview

As detailed in Credit Today's recently-released Technology Buyer's Guide, Version 3.0 on Remittance Processing, applying customer payments in a timely and accurate manner is a key part of the order-to-cash process -- and a great place to cut costs and improve your credit department's productivity.

If you key payments manually into an A/R software module, cash posting can take considerable time. In addition, due to a lack of information, some payments will be posted on the account pending further research (or otherwise tagged to a suspense account or flagged for follow-up). Automated remittance processing systems will greatly reduce the time and labor required to post customer payments and also increase the number of postings that are cleared on the first pass.

First up, let's consider what you should know to do a thorough upgrade of your remittance processing. Here's a checklist of critical issues:

Automated Remittance Processing Critical Issues
 
Pass Fail Component Being Checked
Timely and accurate cash posting
Automatic identification of as many deduction and dispute types as early as possible
The ability to capture and translate customer remittance advice details in order to drive automatic cash posting
The ability to manage multiple payment types
Having a large library of automated matching algorithms
Provides customers the capability of indicating multiple deductions when paying through an EIPP portal
The ability to capture and interpret customer remittance advice details when transmitted separately from the payment in order to update the collection process with promised payments and code the deduction and dispute management system with problem types
Eliminate unnecessary lockbox fees

 

While EDI has been around for quite some time without fully delivering on its promise, primarily due to the complexities inherent in establishing each individual trading relationship, electronic payments are nonetheless growing rapidly. The use of ACH for commercial transactions is growing while the use of paper checks is declining (See "Credit Today Benchmarking Survey: The Latest Data on Cash Application & Remittance Processing"). Moreover, with the enactment of Check 21 legislation, allowing images of paper checks to be used as a substitute check in the clearing process, this trend will undoubtedly accelerate.

Even so, there remain ample opportunities to implement auto-cash solutions, which are usually associated with bank lockbox operations processing paper checks, to address the inefficiencies of manual remittance processing. Until trading partners are able to move to an entirely electronic payment and remittance processing system, the software used to process transactions must be able to address the multitude of exceptions that arise in conjunction with B2B transactions.

This again is the lesson learned with EDI. It is possible to build a system that works with a customer and a vendor, but chances are the vendor can't fully migrate that system to another customer because of the nuances of their trading relationship and their own internal systems.

The beauty of auto-cash is that it teaches us how to handle high payment volumes from lots of customers. This knowledge will be extremely useful as companies add more electronic trading partners. Emerging advances in technology such as the use of XML data tags are providing the flexible structure necessary to easily build data bridges between trading partners. As remittance processing technologies improve, so will your ability to process transactions quickly.


head

Want to start your Digital Transformation Journey today? 

Click here to connect with one of our Digital Transformation Experts. 
instructor
name title image description Ins
Robert S. Shultz Founder, Quote to Cash Solution As a Founding Partner of Quote to Cash Solutions (Q2C) LLC, he provides consulting services in all aspects of the credit and collections process for companies of all sizes in a variety of industries. Robert Shultz has had a thirty-year career as a global credit and financial executive for large multinational companies. As a Founding Partner of Quote to Cash Solutions (Q2C) LLC, he provides consulting services in all aspects of the credit and collections process for companies of all sizes in a variety of industries Shultz has had a thirty-year career as a global credit and financial executive for large multinational companies. As a Founding Partner of Quote to Cash Solutions (Q2C) LLC, he provides consulting services in all aspects of the credit and collections process for companies of all sizes in a variety of industries. Robert Shultz has had a thirty-year career as a global credit and financial executive for large multinational companies. As a Founding Partner of Quote to Cash Solutions (Q2C) LLC, he provides consulting services in all aspects of the credit and collections process for companies of all sizes in a variety of industries.