Electronic remittance systems represent a new wave of applied technology that also helps small and mid-market firms better manage the flow of their payments and reduce handling and processing costs, according to Judy Hill, senior vice president of treasury management for MB Financial Bank. MB Financial Bank is the lead bank for MB Financial Inc., a Chicago-based, $5 billion holding company.
Smart Business spoke with Hill about ways remote-capture remittance services can help small and mid-market companies streamline their remittance procedures and save cash and time in the process.
What are remote-capture remittance systems?
Remote capture services allow businesspeople to electronically deposit checks received from their clients into their own business bank accounts without having to leave their offices. These are checkless payments that are created when a written check becomes an electronic check. Deposits are recorded immediately.
Tracking numbers on checks are used to create deposit and account reports. Companies can get immediate account information and can work with their banks on other services such as intra-day reports on cash flow.
What do businesspeople need in terms of equipment to make that conversion?
In order to use the remote capture system, companies need a scanner and related software developed specifically for the paperless deposit. The scanner is about the size of a small telephone and connects to a PC. Paper checks are scanned into the PC and become electronic images. Once the checks are scanned, the person can go to their bank’s Web site, log in and make the deposit.
What are the advantages of making paperless deposits?
For companies including small and mid-market companies there are savings because it eliminates the transportation of paper. Some companies hire messengers or even armored cars to carry their deposits to the bank. Those costs are significant.
Also, in many companies, someone goes to the bank to make the deposit. Sometimes, time prevents those deposits from being made every day. Instead of having checks hanging around in the cash drawer and risk being lost or stolen, they (can) be deposited every single day without an employee having to leave the facility to go to the bank.
Finally, if a company has six or seven offices in different locations, the paperless system gives the company the opportunity to consolidate and centralize their banking functions.
What happens to the paper checks that are scanned into the system?
Checks have tracking numbers that are used for verification, so you still have to keep the checks until you have confirmation that they have been fully processed through the banking system. Some companies keep the checks for 20 days, others for 30 days, but it’s not recommended that checks be saved for longer than 30 or 45 days.
How do system users prevent those on-hand, scanned checks from being stolen?
A lot of companies are keeping them in safes. Then, after the 30 to 45 day period, checks are shredded prior to disposal. Some companies do the shredding at a secure location. Either way, it’s important to get a good quality shredder.
How much money must business owners invest in equipment and training to use paperless remittance systems?
The equipment costs about $1,500 and there is some training to learn to use it. Training is most often done by the bank and most don’t charge their clients for training sessions.
On average, how long does it take to recoup that investment?
Every company is different, and the payback time depends upon how much a company uses the system. But on average, the payback on the equipment investment is about 12 months. However, if a company is paying a messenger services $375 a week to get their money to the bank, the payback is about two months.
Is remote capture usage growing among small and mid-market businesses?
There are a lot of toes in the water, but not many companies are jumping in all the way yet. However, in the next 12 months we’re going to see a lot more activity because banks are going to offer it and because companies may be more willing to accept it understanding that going paperless is going to happen across the board eventually.
Judy Hill is senior vice president of treasury management for MB Financial Bank. Reach her at (847) 653-1974 or firstname.lastname@example.org.