Maximizing Technology Efficiencies through Outsourcing

The payment industry is growing in its complexity since the establishment of the Check 21 Act, signed into law in 2003, and taking effect a year later. Check 21 essentially eliminates the requirement that original checks be presented for clearing, allowing for the acceleration of the clearing process through electronic means. With the door opened to more cash management options, the opportunity to “get more for your money” is a slogan that has quickly become a reality.

Image cash letter exchange… remote capture… corporate capture… ARC… privacy requirements… disaster recovery… changing postal regulations… skyrocketing fuel costs…

These and other issues are combining to make the business of payments more expensive and more complex.

Increasingly, companies are looking for ways to make their operations more efficient while simultaneously adding processing functionality that allows them to offer enhanced products and services. In a recent survey of Fortune 500, CFOs asked about their experience with outsourcing, 90 percent of the survey respondents said outsourcing was critical to their ability to return value to shareholders and customers.

Perhaps somewhat surprisingly, reducing costs was not the primary reason companies elect to outsource. The survey found gaining access to vendor expertise was the leading factor (cited by 70 percent of respondents), followed by a desire to concentrate on core business functions (64 percent) and reducing personnel and related costs (53 percent).

Implementing technology solutions can be expensive and time consuming. Combine that with the financial and reputation risk of implementing the “wrong solution” and you quickly see why many companies, big and small, consider outsourcing a winning business strategy.

Non-profit organizations should not be left out of the equation, as they too benefit from the enhanced caging and database services that outsourcing can afford. There is still more for non-profits to gain from their outsourcing partners. Check 21 allows for increased funds availability through the use of electronic services. Utilizing financial electronic service options to accelerate donation funds remains an untapped resource for many non-profits.

As charities consider a host of new technologies and processing capabilities, many are finding that there is not a single simple answer. What direction should your organization go? What strategies should be employed to get there?

These can be very difficult questions. And, in most cases, a “one size fits all” solution is probably not the best solution.

With the example of funds acceleration, there are several new cash management tools, which if used properly by organizations, can add significant value to donation deposits. In the paper world, it’s typical for an organization to realize delayed funds availability by one, two, and in some cases three or more days. With electronic exchange through the use of technologies such as Accounts Receivable Conversion (ARC) or image cash letters, this delay is eliminated ultimately providing accelerated funds availability on daily deposits.

In a typical scenario check donations are processed and deposited through a paper cash letter to an organization’s bank of choice. In today’s world those paper donations can be converted to an ACH debit through the use of ARC. Since most consumer checks and some business checks are eligible for conversion a large portion of the deposit can benefit from the conversion.

ARC transactions can be settled faster, usually resulting in substantial float savings for the biller. Because financial institutions generally charge less for an ACH credit than for a check deposit, a reduction in banking fees may result. Finally, billers that use ARC usually find that the number of return items drops significantly due to faster presentment and the way in which financial institutions process debits against their customer accounts - ACH debits are usually posted prior to check debits, resulting in less NSF (non-sufficient funds) returns.

Another option to consider is the image cash letter. By eliminating paper deposits and transmitting daily deposits directly to a clearing account via an electronic image file (image cash letter), deposits enter the check clearing process more quickly and can provide faster availability on all image deposited funds.

The image cash letter can work stand alone or in conjunction with ARC. Since ARC is limited in the type of check that can be converted, there is still a percentage of work that must be deposited via paper. With an image cash letter, this remaining paper volume can also be deposited via an electronic image file so entire deposits can benefit from accelerated clearing and increased funds availability.

These state of the art cash management products provides, in most cases, a significant increase in funds availability on deposited items, which means donation dollars go a long way. A part of being a successful outsourcing partner is finding ways to assist non-profits in maximizing their donation deposit.

That is why for increasing numbers of charities, outsourcing is a strategy that works, but only if emphasis is placed on choosing a partner wisely. Outsourcing allows non-profits to focus limited financial and personnel resources on core business functions, such as donation campaigns while simultaneously benefiting from industry experts whose core competency is the function being outsourced.

As the payment environment continues to evolve, more charities will look at outsourcing as a way to control costs and reduce capital investment requirements while minimizing the risk associated with technology investments.

In choosing the right outsourcing partner consideration will need to be given both to caging and banking services in order to maximize donation possibilities.

FISC has provided outsourcing solutions to non-profits, financial institutions and other organizations for 30 years. We understand both the payment and the financial industry. We offer a full range of solutions and provide a unique ability to customize solutions to the market needs of individual clients maximizing on our expertise in both caging and banking services. We would welcome the opportunity to meet with you to discuss your current situation and determine if we have a solution for your particular needs.

For more information on FISCheckAccelerator, you may contact FISC’s Marketing Department at info@fiscsolutions.com or via phone at 207-782-6858.