By: Chris Gordon January 23, 2024
Now that it’s 2024, it should come as no surprise that many businesses are putting the power of an Automated Clearing House (ACH) for accounts payable (AP) to work.
In fact, a recent survey from the Association for Financial Professionals finds that 73% of organizations are transitioning from paper checks to electronic payments, which can assist a great deal in helping organizations clear an AP check.
So, the question then is, why? Well, for one, switching to ACH can help your business take advantage of improvements to account reconciliation and cash flow—and boost your productivity and profitability. That’s because ACH methods, like Infor’s Cash Management System, paired with Bank Reconciliation, enables the electronic transfer of funds without the necessity of using a physical check, credit card, wire transfer, or exchanging cash.
In this post, we’ll take a look at the challenges related to manual check clearing, explore the advantages of implementing a check clearing automation process within the Infor CloudSuite Finance and Supply Chain Management (FSM) systems, and discuss how RPI Consultants can help you level up your financial workflows.
Organizations are often looking for ways to streamline processes, reduce costs, and improve business operations. And it should come as no surprise that performing anything manually comes with inherent risks and challenges.
Let’s look at the top challenges associated with manual check clearing and discuss the harm it can cause businesses like yours.
1. Slower processing: Traditional methods involve time-consuming tasks, such as manually matching bank statement details with system transactions. They also make it more difficult to get a handle on your company’s overall accounts receivable, to identify outstanding payments, and to collect and maintain accurate data.
2. Resource intensive: Manually managing the inflow and outflow of checks hampers productivity. Because this process requires manual tracking and recording, paper checks can have a negative effect on your business’s accounts receivable process. There’s also the human factor to consider with manual check clearing, your team members have to spend time issuing, processing, and reviewing payment—time they could be using on more important (and valuable) tasks.
3. Susceptible to human error: Manual data entry is prone to errors, which can have serious consequences in the financial domain. Also, manual check clearing is better for bank accounts with a smaller volume of monthly transactions than your business likely has; using the manual method can lead to delays and increased operational costs. Conversely, automation can provide tangible cost savings of up to 80% over paper-based processing.
4. Lacks security: Paper checks are less secure, and if they are lost or stolen, recovering the funds can be challenging, or even impossible. This is why bank officials and postal authorities warn against mailing checks; according to the Associated Press, banks reported around 680,000 incidents of check fraud to the Financial Crimes Enforcement Network in 2022. What’s more, checks are more susceptible to fraud, as they can be easily altered, or even counterfeited, to redirect funds to criminals’ accounts. It can take time for banks to discover a fraudulent check deposit, and in the meantime, businesses have to deal with the financial losses caused by the fraud.
5. Less helpful with compliance: The evolving regulatory landscape demands heightened compliance, making manual processes susceptible to human errors that could result in costly consequences. One of the banking regulations set forth by the Federal Reserve is Regulation CC, which includes the Expedited Funds Availability Act (EFAA) and the Check Clearing for the 21st Century Act (Check 21). These laws set requirements for the timely availability of deposits that are made by customers into transaction accounts, by addressing the lengths of hold times banks previously placed on checks deposited by customers. Because financial regulations are always evolving, your organization would be well-served by relying on a solution such as Infor ERP. The right system can help you stay up to date with industry standards—and avoid costly sanctions and fines.
Automating the check clearing process within your Infor ERP system is a strategic move for enhancing operational efficiency and ensuring compliance.
Here are some of the key benefits you can expect as the result of implementing an automated check clearing process:
1. Time and cost efficiency: Automated check clearing drastically reduces the time and effort spent on manual check processing. By automating repetitive tasks, your team can focus on more strategic activities, leading to significant time and cost savings. For example, ACH processing incurs little to no additional bank fees, whereas manual check processing can cost up to $4.00 per transaction. To assist with the time savings, ACH payments also avoid the unclaimed property burden that checks require. That’s because funds are automatically deposited, unlike manual check clearing, which involves the extra task of filing unclaimed property when payments aren’t cashed.
2. Accuracy and compliance: Automation ensures accuracy in check clearing by improving the accuracy and timing of data capture, reducing the risk of compliance issues and financial discrepancies. It also includes automatic updates that reflect changes in regulations, helping ensure your organization remains in compliance.
3. Real-time visibility: You’ll gain real-time insights into your business’s financial transactions with automated check clearing. It provides a centralized platform for monitoring and managing all aspects of the process, enhancing transparency and control. It also lets you view the status of important tasks, so you can locate and address potentially costly issues in real time. Automated reports help improve internal controls—and give you a comprehensive look at your transaction history, as well as detailed information on remittance and/or check image documents. Take a look at the many ways Infor’s automated reporting can provide your business with valuable insights.
4. Enhanced security: Manual processes may expose sensitive financial data to potential security risks. Check clearing automation prioritizes data security, ensuring that your financial information is handled with the utmost confidentiality and compliance.
5. Scalability and adaptability: As your business grows, so will the volume of your financial transactions. Automated check clearing can easily adapt to your organization’s changing needs, making it more scalable and eliminating the need for frequent (and costly) manual adjustments.
Automating the check clearing process within your Infor ERP system is not just a technological upgrade, it’s a strategic investment in the future of your business.
If you’re currently running your business on , RPI Consultants can configure and enable the Bank Reconciliation functionality within your Infor Cash Management system.
Here’s how: we support the BAI2 file integration from your bank into Infor. For reference, BAI2 is a file format which helps companies reconcile bank accounts and manage cash more effectively, as well as create proper categories and rules so that Infor can automatically clear your AP disbursements.
RPI can also train your staff in this new process, so they can support the exceptions, which will save you valuable hours of manual reconciliation work each month.
By leveraging RPI Consultants’ specialized services, you can unlock the full potential of your financial operations, streamline processes, and position your organization for sustained success in an ever-changing business landscape.
Put another way, by embracing automation, your organization can transform its financial workflows and gain a valuable competitive edge.
Contact us today to find out how we can help you empower your team with efficient, accurate, and compliant check clearing processes.