Trends in Exception Automation Technology
Many corporate treasury managers face the challenge of processing non-standard payment forms from customers. Ideally, the receivables group creates a payment coupon with a ‘scan line’, or barcode, and the client returns their payment with this coupon. The scan line provides an efficient way to extract payment data from the coupon by feeding it directly into a cash management database. This process works well for consumer to business payments, but not in typical business-to-business (B2B) environments.
Treasury managers in B2B payment environments know that the payment forms their clients submit are anything but standard. These forms can possess anywhere from a handful to hundreds of payment transactions, often called lists. Also referred to as exceptions, these non-standard payment forms prove difficult to process through a high-speed scanner. Exception payment forms may require special workflow routing to knowledge workers who evaluate, review and correct the data. The process of extracting and posting the data from these forms proves highly manual, creating data accuracy problems and slowing down information needed for cash management.
Managing exceptions is an expensive and error-prone proposition. The process begins in the mailroom where employees open envelopes and sort the contents by hand. Personnel sort checks into one pile while the exception payment forms go into another. However, before separating checks from payment forms, individuals mark each document so it can be re-associated later in the process.
Employees use a high-speed reader where checks are coded for bank deposit. Prior to packaging checks for transport to the bank, an individual must photocopy each one, making it available for the data-entry operator responsible for entering the payment information. Meanwhile, the forms are sorted by size and fed through a high-speed scanner for imaging and then routed electronically to a data-entry operator. The operator keys the pertinent data from the payment form and the check. If the data-entry operator identifies a problem with the transaction, they then route the payment form image and the physical check to a knowledge worker for correction.
Depending on the complexity of the payment form and the quality of the associated form image and photocopied check, this labor-intensive process can take days to complete, although most checks are deposited the same day received. However, teams responsible for posting information from the payment form to the corporate accounting system are often behind, making accurate cash forecasting difficult.
A number of new image and data capture technologies are available to treasury managers that automate processing exception payment forms and documents. In order to achieve the greatest efficiency, experts recommend combining components for an integrated approach as described in the following examples.
Corporate receivable groups have widely adopted imaging and refer to it as back-end imaging. Illustrated in the earlier scenario, back-end imaging involves image capture during the process, after manually opening and sorting mail and its payment contents. In contrast, front-end imaging involves new scanning devices with integrated mail opening capabilities. This equipment can automatically open mail, but more importantly, image the entire contents without regard to document size or type. Now entire workflows can be modified to eliminate manual steps and perhaps even redundant hardware. Immediate workflow changes might involve eliminating manually opening envelopes and sorting payment forms and checks into separate piles. With all documents imaged on the same device, the payment form and check images are associated throughout the entire receivables workflow, therefore eliminating the need to – and expense of – photocopying checks.
With the upfront association of payments and checks, images can immediately pass through an optical character recognition (OCR) application. This process captures all of the characters on the image. Using zonal templating technology and intelligent character recognition (ICR), operators use a mouse to draw a box or ‘zone’ around the data they want to extract. Thereafter, if a payment is received from the same customer, the system uses the check’s magnetic ink character recognition (MICR) data or other key identifiers to recall and apply the template, capturing the data automatically without operator involvement. Other benefits include the ability to extract key payment data early in the payment handling process to improve information flow, and immediately balancing transactions because checks and payment forms are tightly associated. Implementing these technologies typically reduces the need for data entry operators by almost 50 per cent.
A large concern for most treasury managers revolves around handling and managing errors. Errors may involve a customer supplying incorrect data on the payment form or check, or the error may relate to OCR misreads. With manual or back-end image-based systems, resolving errors may also be a manual process. A front-end image-based process that leverages zonal template technology and ICR typically identifies and sorts errors automatically. It then routes them to the appropriate knowledge worker. These systems present the error to an operator within a dedicated screen and normally provide them with the appropriate resources to correct the error within seconds. Many systems take error correction a step further by providing components that utilize intelligent decisioning to analyze OCR errors and repair them without operator involvement.
One of the largest challenges for treasury managers involves validating and posting payment data to their accounting system. If the environment deals with non-standard forms and complex payment transactions, then performing this task may require dedicated knowledge workers. As with most B2B transactions, the line items and amounts returned or paid by a customer do not exactly match what was invoiced. This may prove especially true for fast turnover inventory environments such as distribution or manufacturing. Many automated processes offer the opportunity to import data directly from your account receivables database and intelligently map it against the data captured from the payment form. This process accomplishes two things. First, it significantly increases the accuracy of captured data by validating it against known corporate information and records. Second, it allows for timely updating or posting of receivables file. Automated validation and posting will greatly reduce the dependency on dedicated knowledge workers to review captured data.
The final piece of a system that improves the automation of exception payments leverages either ACH or Check 21. Both provide the treasury manager with the option of sending the depository bank, in real-time, either the check information or the check image. Either way, managers save significant time and expense in deposit preparation. Currently, these two technologies are only available for processing consumer checks. However, many business-to-consumer (B2C) environments are not able to get customers to return a pre-printed coupon, or they haven’t made the transition to providing coupons with a scan line. Even these single transaction coupon payments can require significant manual processing. In this scenario, treasury managers can deploy ACH or Check 21 processes to eliminate the need for coding physical checks before depositing them at the bank. For those who outsource their checks to a bank to perform the coding, it would eliminate that expense.
Many cash management and treasury operations that manage non-standard or exception payment forms still process a large percentage manually, the cost of which can be significant. New advances in non-standard and exception automation can yield measurable efficiency in terms of data accuracy, speed of information flow and time to deposit, and operational savings. In addition, companies can re-allocate valuable knowledge workers from manual tasks to more important decision-making assignments. Many of these technologies can be deployed as modules or combined to create an organization-wide solution. Finally, even small- to medium-sized organizations that struggle with a lower volume of exception payments now have components and solutions from which to choose.