The Payments Landscape
In North America, the value and volume of ACH payments have increased year on year over the last five years. In 2019, ACH volumes increased by 7.7% to 24.7 billion items, and ACH values increased by 8.9% to $55.8 trillion from the 2018 figures. The volume of business-to-business (B2B) ACH payments were up by 12% at 4 billion items. ACH is rapidly moving towards the most used form of payment in North America. Checks still continue to be the most popular form of payment for B2B transactions. (source: Nacha)
Checks more often contain additional information than electronic payments do. This helps the finance department to match payments with sales made. An invoice is usually attached to a check, whereas invoice details may not always be included with electronic or ACH payments. Remittances can also be received by way of emails, which are sent to a designated email inbox. These are received separately to the bank statement/ACH’s.
In the US, checks are still popular as they are seen as a trusted form of payment, even though they are quite expensive for companies to use/process. Especially if a business receives a high volume of checks for reasonably low monetary amounts. The majority of this expense can be related to lockbox banking services provided by the bank. A lot of companies are using lockbox services in North America.
What is Lockbox banking?
Lockbox banking help businesses to streamline the deposit and processing of checks into their bank accounts. Banks collect the checks from a designated address (usually a P.O. Box) that you provide to your customers. The bank will then process these checks on your behalf and deposit them directly into your bank account.
Once lodgements have been made, the bank will send you a lockbox file of the total deposits. The lockbox file will be used by you in conjunction with a BAI2 file; also provided by the bank. You will then need to match deposits against open Accounts Receivable (AR) invoices for all your customers. Subsequently updating your General Ledger (GL).
Lockbox banking results in the cash being present in your accounts much quicker than usual. It helps your employees to avoid daily bank runs to deposit checks manually. This service means a lot of time saved for your employees, and faster access to your funds means better cashflow for your company. However, this highly useful bank service comes at a great expense to your company.
Lockbox charges and keystroke fees
Banks will always charge for a service that makes life easier for their customers. There are two separate charges for Lockbox banking. You have the standard annual fees for the service, and you then you have the keying fees. Banks will charge you anywhere between 1 and 3 cents for each character in the lockbox file. This does not sound like much but if you have a high volume of checks each year it becomes quite an expensive process.
Cashbook currently has a client that receives a large volume of checks for nominal amounts. Our client used to pay $100,000 every year on bank lockbox keystroke fees alone. Once our client went live with Cashbook, they eliminated those bank lockbox keying fees! So, they are saving $100,000 every year on the lockbox process with no slowdown in productivity. As they now have images of both checks and remittances, their audit, collection, and document management processes are also greatly improved!
Cashbook’s OCR/Data Extraction tool
Cashbook’s OCR/Data Extraction tool can be used to automate lockbox files, bank statements and remittances received by email. The tool helps to eliminate expensive lockbox keystroke fees and also save huge time and expense on your existing manual ACH and email remittance process. In this section, we will cover how Cashbook works for each of these two key financial processes.
Lockbox keystroke fees
The lockbox file can be uploaded directly into the Cashbook software, the OCR/Data Extraction tool will use the images to identify the customers. It will then auto-match the invoice numbers to open invoices for selected customers. These invoices are closed off and your GL is updated. As the tool uses the images in the lockbox file to read the invoices, this eliminates the need for a separate BAI2 file from the bank. Thereby, eliminating those expensive keystroke charges that we discussed previously.
Bank Statement & Email Remittances
The bank statement file can be uploaded directly into the Cashbook software. Some companies receive separate remittances by way of email. The files are in the format of: PDF, Excel, CSV or even in the body text of the email.
The tool then reads the remittances direct from your nominated inbox no matter the format. It identifies the email address of the customer; invoices will be extracted and auto-matched against the bank statement transactions. Invoices are closed off and your bank control/GL are updated after post action is taken. This automates what was previously a manual process for your finance department.
Key Savings with OCR/Data Extraction tool
When it comes to savings by monetary value, the Cashbook OCR/Data Extraction tool can save your company tens of thousands each year. The exact amount depends on the processes your finance department undertakes, and if you are a lockbox user. If you are spending large amounts on lockbox keying fees, this product is essential. The return on investment will be absolutely huge. If you are processing bank statements manually and receive your remittances by email. This tool is going to transform your finance department. The savings of both time and resources are too big to overlook. Below, we have listed some of the key statistics of using our tool.
- 50-90% automation of all invoices.
- 50% reduction in time required due to automation.
- 100% reduction in lockbox keying fees.
If you would like to discuss how Cashbook’s OCR/Data Extraction tool can automate these AR processes for your company, get in touch with our team. You can call us on +353 61 338 400 (Intl.) or 630-352-2228 (North America). Alternatively, you can email Global Sales Manager, David Rushe to get more info. We are looking forward to showing you how Cashbook can help your company realize the benefits of Cash Application automation.