Cash flow is king!" There is probably no more important finance principle than that. Processing of incoming remittance mail plays a huge role in ensuring a timely and accurate cash flow for organizations that send bills to customers. Getting payments processed and the money deposited in the bank is crucial! Ensuring that customers have their payments posted accurately and on a timely basis is also important to help retain the customers that we have.
The following 12 best practices are probably most appropriate for "medium-sized" and "larger-sized" operations although smaller shops may pick up a pointer or two. Some good questions arise how can a remittance processing operation minimize costs? How can cash flow be helped? How can customer relationships be enhanced? To help provide some answers to these and other questions, keep reading.
12 Best Practices to Make Your Operation Shine
Compare this list against your operation. Following the philosophy of "continuous improvement," perhaps identifying one or two areas that may need improvement as a starting place would be a rational approach to consider. Since "talk is cheap," I will briefly share what Portland General practices. We have come a long way, but since we are not perfect, we are always trying to improve. Hang onto your hat
here we go!
1. Let 'er rip The first step in the processing cycle is to get the mail opened. Using high-speed mail opening technology is the way to go and really pays for itself by reducing labor costs. At Portland General, we open our "clean" (single check, single document) mail on an Opex 7.5 Multi-Purpose Extractor (MPE). For the exception mail, we use Opex 51s, which are still much faster than manual opening.
2. Image is everything When volumes are relatively small, "drop and key"-based systems have their place. But when volumes are large enough that you have several people involved in keying payments, it's time to consider investing in an image-based system. A good image-based solution can result in "kill rates" (automated matching of check and coupon amounts) exceeding 80%, which results in a huge reduction in the time spent keying. Portland General uses an image-based system consisting of the Unisys Remittance and Lockbox system, OPEX Import Export Module (IEM) and Unisys NDP-500 Transports. With the CAR- and LAR-based software, our kill rates are consistently over 80%.
3. Quality is job one For some reason, customers expect their payments to be posted accurately to their accounts! It's crucial to develop practices and use systems that ensure a high level of accuracy. At Portland General, our CAR/LAR software has proven extremely accurate for matched transactions. For the remaining transactions, we use a verify process whereby a second keyer inputs amounts and makes sure there is a match. Our posting error rate is running less than 0.02%!
4. Better today than tomorrow "Cash Flow is King!" Getting payments processed and deposited the same day maximizes cash flow and minimizes float costs. Posting payments to the Customer Information System the same day results in timely information for your contact center and makes for happier customers. We have a challenging performance standard of 99% same day processing, depositing and posting of "clean" payments and have achieved 100% the past four years.
5. Better late than never Most operations have couriers pick up all deposits at the end of the normal working day. Unfortunately, there are those days where Murphy's Law has struck and payments are only partially processed by the time the couriers are scheduled to arrive. Best practice is to have late night deposit rights for your depository banks. Portland General has deposit rights up to at all three of our banks and still gets same day funds availability.
6. I want it now Cash availability is important for your company to be able to pay its bills and keep interest/float costs low. Best practice is to negotiate same day availability of funds for "on us" checks deposited at your depository bank(s). We have same day availability for the three banks that we deposit to. This means our finance team has already spent the money received from customers, even though the banks don't get the checks until that evening. We have recently implemented ARC (Accounts Receivable Conversion), which converts eligible checks to ACH transactions. For the 70+% of the checks that qualify, our bank fees have been reduced significantly.
7. Show me the money Since cash is the lifeblood of the organization, saving money is always a good idea. One best practice is to pre-encode checks and negotiate lower processing fees from the banks. Another best practice is to use automation and follow efficient procedures to drive the cost per transaction down. Converting to ARC will also lead to a significant reduction in bank fees. At Portland General, we pay low bank fees due to ARC and our pre-encoding, and thanks to our Opex and Unisys systems and the processes that we follow, our cost per payment processed is very low.
8. Protect my privacy Privacy of customer information has always been important, but it now seems to be more of a hot button issue than in the past. Best practices include the use of security
envelopes (e.g. shaded) that protect the confidentiality of the information inside. Privacy envelopes should be used for both outgoing and reply envelopes. At Portland General, we have partnered with our envelope vendor Cenveo to develop envelopes that have strategically placed shading so that confidential information does not show through the envelope.
9. Mark the way A high percentage of customers choose to mail in their payment which consists of a check and the remittance stub from the bill. For several years, credit card companies have allowed customers to indicate change of address by writing on the back of the remittance stub. "Mark Sense" technology can then be used to take an electronic image of the front and back of the stub and then use to update the company's Customer Information System. Best practice companies use this "mark sense" technology. At Portland General, we have adopted "mark sense" for address changes and for receiving customer comments. But we have also creatively used this technology, making it easy for customers to enroll in alternative power options and order products like home-based generators.
10. It'll never happen to me Technology is great when it works but the reality is that machines sometimes break down. Best practice operations have both internal and external means to keep the cash flowing. In the case of Portland General, we have internal redundancy by having an Opex 5.0 high-speed mail opener that we use for peak times and as a back-up. We also have three Unisys NDP 500 Transports that ensure we can get the work done even if one unit is down. For off-site back up, we have a reciprocal emergency back-up agreement with another in-plant operation in the area.
11. Finding the needle in the hay stack Occasionally, there is the need to find a copy of a previously processed check or payment coupon. Best practice is to have an online, imaged-based archival system that is indexed so documents are easy to find. We have an indexed image-based system that allows us to quickly pull up the desired images, which we then can fax or print and get to the customer service representative or customer as needed.
12. On your mark, get set, go Best practice operations are able to meet same day processing targets and keep costs low because they use fast equipment both for mail opening and payment processing. As previously mentioned, Portland General uses the Opex 7.5 MPE for most of its mail opening needs (can open at rates over 7,000 pieces per hour) and Unisys NDP 500 Transports (can process payments at rate of up to 500 per minute).
Managing remittance processing can be very challenging but also very rewarding! Good luck as you pursue best practices and look for ways to add even more value to your organization!
Wes Friesen is Manager of Revenue Collection & Community Offices for Portland General Electric, a utility located in Portland,