Process your own checks? Featured

7:00pm EDT February 23, 2009

Convenience, time savings, faster access to cash — all of these are touted as benefits of processing the checks you receive from customers directly in your office. The procedure, known most commonly as remote deposit capture, but also as electronic check service, image depositing and other like terms, has been around for a few years now thanks to “Check 21” legislation implemented in October 2004 that allows banks to clear checks based on images of the original items.

“RDC enables businesses to scan the checks they receive and transfer the image electronically via an Internet connection to the bank for posting and clearing,” says Scott McCallum, senior manager, Cendrowski Corporate Advisors. “While there are different solutions for retail-type businesses that accept mostly cash and credit cards — and while larger companies processing a large volume of checks will often be better served with a lockbox service — RDC can be an attractive solution for small business owners and small to midsized professional service firms, such as law firms, financial advisers, accounting firms, physician and dental offices, insurance agencies, and real estate firms.”

Smart Business spoke to McCallum about how a business could benefit from this technology.

In a nutshell, how does the process work?

This is a relatively new technology that basically places the check-clearing process in the hands of the bank customer. Rather than collect all the checks and take them to the branch, you can process the checks in your office at any time that is convenient, day or night. You still need separation of duties. The person handling and scanning the checks should not be the same person doing the bookkeeping. After you scan the checks and transmit the images to the bank, you hold the checks for a determined amount of time with guidance from the bank, usually 60 days. During that period, you have to retain them in a secure place and, afterward, destroy them.

What are some of the advantages of processing checks yourself?

The main saving is in transportation costs. It saves time by eliminating the need for a person to physically take checks to the bank, either daily or weekly. In that regard, it’s a great control mechanism for arranging the workflow of administrative personnel and eliminates the downtime involved with them having to deliver checks. In some cases, there may be some social sacrifice for the person who goes to the bank and who may enjoy the interaction with bank personnel, but there will be the benefit of the opportunity costs for what else they can be doing with their time. Another benefit is that you will quicken cash flow. By accelerating the clearing process, you speed up the process for when the funds will be available. Also, if an item is returned, you’ll know faster. Ongoing costs should be cheaper since physical transactions tend to cost more than electronic ones. Yes, there is the cost to rent or purchase the machine and/or there may be some per-item costs, but they tend to be lower than when presenting paper. Plus, if you keep enough in balances, the bank may waive the fees. For most businesses, there is a cost savings.

What about downsides?

There is some potential risk for insider fraud, but there are ways to control it. Banks usually provide training on how to use the system and the best practices to reduce fraud. They will also provide you with a contract defining who is responsible for what. During the time frame that you are responsible for the physical checks, make sure you have a policy about where you store them and how you destroy them.

What kind of banks are promoting this?

This is a great equalizer for community banks, which don’t have a lot of branches, as it takes away or neutralizes the convenience factor of the branch. In essence, a bank that sets up an RDC system in your business is putting a deposit center right in your office. Community banks in certain cities are really going after this business. Bigger banks have the technology and offer it, but many don’t promote it as heavily because they are heavily invested in your coming into the branch.

What can a business do to get started?

If your bank hasn’t promoted this technology to you, ask what it offers. You may be able to walk through an online demo or have a representative come to your office to conduct one. Keep in mind that whenever you use an image in lieu of actual paper you will be subject to risk. An image may not clearly reveal things like counterfeiting, physical alteration, or forged or missing information — but you have risk with physical checks, as well. Talk to your bank and your accounting firm about the risks, although usually the cost savings and speeding up of cash flow will outweigh them.

SCOTT McCALLUM is a senior manager with Cendrowski Corporate Advisors. Reach him at (866) 717-1607 or, or visit the company’s Web site at