Benefits of merchant capture

With the advent of Check 21, you
might want to consider a new way
of handling the checks you receive from your customers. Check 21 is short for
the “Check Clearing for the 21st Century
Act” which went into effect on Oct. 28,
2004. Instead of checks physically being
taken from your facility to your bank,
through a Federal Reserve bank, to your
customer’s bank and then to the customer,
they only leave after being electronically
processed and eventually shredded.

“With the rollout of Check 21, there are
significant savings and efficiency benefits
to financial institutions and commercial
customers, with the use of merchant capture,” says Tracy L. Marshall, vice president of treasury management at
ViewPoint Bank in Plano. “By working
closely with your business banker or
treasury management professional, you
can determine if merchant capture is right
for your business.”

Smart Business talked with Marshall to
gain more insight on this process.

What is merchant capture?

Merchant capture is a system between a
merchant and his bank whereby the merchant captures or scans his customer’s
checks and makes his deposit by transmitting the MICR information and the checks
image to his bank electronically. The electronic transmission continues through to
the customer’s bank for the settlement of
funds. This process eliminates the need for
the paper check to physically move from
place to place. The check writer may
receive a substitute check from his bank,
or he may see a copy of a substitute check
on his account statement.

What are the benefits of merchant capture?

It can be more cost-effective for you and
your bank. The scanning process reduces
the amount of time previously required for
handling checks. Also, you don’t have to
worry about getting the checks from your
location to the bank before closing time or
to the night deposit, which you may consider a safety issue.

Another benefit is quicker availability of
deposited funds. In most cases, you can
negotiate with your bank a next-day or
same-day availability, whereas previously,
the funds may not have been available for
three to five days — or longer in some
cases. If you are tightly managing your
cash flow, merchant capture could play a
huge role by providing access to funds
quicker.

Another benefit is to companies with
multiple locations, because they can
process checks from all locations into one
central bank account instead of maintaining local accounts.

Lastly, since the checks remain in your
possession until they are destroyed, you
have the ability to go back and look at
physical checks for research or collection
purposes.

What do I need to know as I consider merchant capture?

The first thing is to have a great relationship with your business banker or treasury
management professional. He or she can
provide a lot of help as you conduct your
cost/benefit analysis. Remember to look at
all costs involved in your current check-handling process. Include the time spent

and the processing and services fees currently being assessed by your bank.
Determine with their help what, if any, savings will be gained by switching to merchant capture. Be sure to factor in the
quicker availability of funds and reduced
processing time. Usually, the more checks
you handle, the more cost benefits will be
realized. If you only handle a few checks
per week, there will probably not be
enough of a savings to make it beneficial.
However, if you anticipate significant
future growth, it may be beneficial for you
to implement now versus later.

Since the checks will be staying with you,
it is also imperative that you develop
processes and procedures to secure the
checks until they are destroyed. You also
will need to determine how long you are
going to keep the checks and the method
to use for item destruction. Many businesses utilize a shredding service or purchase a
high-quality, diamond-cut shredder.

Lastly, if you decide to use merchant capture, the law requires that you advise your
customers that their checks will be
processed electronically.

What equipment do I need for merchant capture?

You will need access to a merchant capture system and a scanner. Here again, a
good relationship with your business
banker or treasury management professional is key. They can work with you to
establish access to their system and recommend a scanner based on the scanning
capacity you need. Scanners currently run
between $700 and $2,000, depending on
the brand and/or scanning capacity. These
costs are trending down as more merchants adopt this product and more scanning vendors enter the market.

TRACY L. MARSHALL is vice president of treasury management at ViewPoint Bank in Plano. Reach her at (972) 509-2020
ext. 3682 or [email protected].