CHAPTER 5: CASH APPLICATION, DEDUCTIONS, AND DISPUTE MANAGEMENT
The bank usually provides the RDC service, and each bank will establish its own rules and regulations to mitigate risk and fraud. Among the concerns companies should be aware of are the following: 1. Scanner quality: A high-quality scanner is necessary, and it is usually one specifically dedicated to scanning checks. In fact, images must also meet standards for image quality established by the American National Standards Institute (ANSI), the Board of Governors of the Federal Reserve, and stipulations of any bank or clearinghouse involved in the transaction. 2. Receipt of files: Just because you press “send” doesn’t guarantee your deposit has been made. That acknowledgement does not mean the file is error-free, and the bank will usually reserve the right to review the information contained in the deposit. 3. Original check retention: Once the deposit is made, what should you do with all those paper checks? This is another area to review and establish guidelines for with your bank. Most banks will require that the customer retain the checks securely for at least 14 days in case of any disputes. Some banks, after the 14 days, require you to shred the checks, since you do have a digital copy of the check saved on your computer. A large number of paper checks sitting around presents opportunities for identity theft or fraud. CHECK CONVERSION—B2C Check conversion has been used for decades for business-to-consumer payments, where a business is receiving a large volume of small-dollar check payments from consumers. Check conversion is different than check truncation. In truncation, the payment remains within the check-clearing system. In check conversion, however, the check payment is converted to an ACH payment. Check conversion is also called electronic check, or e-check. A scanner captures the necessary bank and account information from the check and then executes a one-time ACH debit of the buyer’s account. There are three types of check conversion: 1. Point of Purchase (POP): Introduced in 1999, this is point-of-sale conversion, such as at a retail establishment; the purchaser’s check is scanned on the spot and returned to the customer. 2. Accounts Receivable Entry Conversion (ARC): Introduced in 2002, ARC is used to convert mailed checks into ACH payments; it is typically used for consumer bill payments. 3. Back Office Conversion (BOC): Introduced in 2007, BOC allows later batch conversion in a central location of payments collected at a business payment counter.
Consumer bank statements provide the consumer with details of the transaction, including payee, check number, date, and amount.
ELECTRONIC PAYMENT Not all payments start out as a check. In fact, in Europe very few checks are written at all for business-to-business payments. In the U.S., electronic payments can be made by the Automated Clearing House network (ACH), wire transfers, and various card-based methods such as purchasing cards (p-cards), virtual cards, and AP card payment programs like buyer-initiated payment (BIP).
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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