Payment remittance processing is the receipt and transfer of funds for a sale or service, delivering those funds to the appropriate bank account to complete a transaction. Outsourced remittance processing hands off the accounts receivable process for a third party to complete in a reliable and scalable manner, improving overall business efficiency and customer satisfaction.
Remittance processing goes hand-in-hand with other merchant services to form a complete customer payment experience.
Remittance processing solutions are frequently used by merchants and organizations that receive check payments, such as utilities companies, healthcare providers, property managers, and more.
What Is Remittance?
Remittance is a common term in the financial sector. Remittance refers to any sum of money sent from one party to another, although it is often more specifically considered the payment of a bill or invoice.
The transfer of funds internationally can also be called remittance, such as workers sending money to their families who reside in a different country. In this article, we’ll dive into payment remittance as it affects business banking services.
One common format for remittance processing is lockbox banking, with some payment processors interchanging those terms. With remittance processing, a payment is “remitted,” or sent back, to a separate entity.
Remittance advice is optional documentation sent by the customer to notify the payee that the payment has been submitted. Serving a similar purpose to cash register receipts, remittance advice slips can help provide clarity to the accounts receivable process but ultimately have become less commonly used in the modern payment processing industry.
Lockbox Banking and Remittance Processing
Lockbox banking is a form of remittance processing services where check payments are sent to a designated mailbox, known as a lockbox, to be processed by a third party like FirsTech. Lockbox payment processing often fills the gap for businesses who want to be able to accept paper check payments but do not have the back-office infrastructure to manage that process internally.
Lockbox banking solutions can be provided in a few different formats, including wholesale lockbox services and retail lockbox services. Wholesale lockbox services receive and process payments between businesses, typically receiving a lower volume of payments in higher dollar amounts. Retail lockbox services typically receive customer payments for services provided by a business, receiving a larger volume of payments in lower dollar amounts.
The Lockbox Solutions Suite from FirsTech offers diversified capabilities to cover your remittance processing needs, including Lockbox, eLockbox, remote capture, automated data capture, integrations, online access, customized reporting, and Smart Exceptions.
How Remittance Processing Works
1. A payment is remitted.
The payment is given to the remittance processor. For lockbox payment processing, those payments are sent to a secure P.O. box.
2. Remittance processing specialists collect the payments.
If payments are sent to a P.O. box, those payments are collected at regular intervals. With outsourced remittance processing, you don’t have to worry about your team spending time to physically go collect these payments for processing.
3. Payments are processed.
Payments are reviewed and processed. Third-party remittance processors utilize the latest in imaging processing technology, plus they do not need to do any presorting before processing payments.
4. Payment batches are deposited into the payee account.
Payments are delivered as batches. These payments are deposited on a regular schedule, allowing for a more sustainable cash flow for your business.
5. Digitized payment information is shared.
When a batch is deposited, an accompanying report will detail payment information. This data can be integrated into accounting software and customer management platforms.
5 Benefits of Outsourced Remittance Processing Services
Remittance processing services are highly valuable to businesses and can form a unique pillar of a complete payment processing plan. Here are the top benefits of outsourcing remittance processing services.
Reduced Required Tools
By working with a remittance processor, your back-office team does not have to set up and maintain the software and hardware necessary to process checks and payments. Remittance processing providers can invest in the latest remittance payment technology, such as advanced imaging technology and automation tools, which leads to a more secure and reliable process. Remittance processing services from a reputable provider will be AML/CFT complaint.
Legacy check processing systems often have restrictions, like only being able to process checks of specific sizes. Sometimes these systems are incompatible with other accounting and business software programs. With outsourced remittance processing, data about your payments is delivered in an accessible electronic report that can be uploaded to your accounts receivable system.
Improved Cash Flow
Outsourced remittance processing accelerates cash flow through timely deposits of processed payments. Your payment collection cycle can be shortened by partnering with a remittance processor who can complete check transactions faster than your back-office staff would be able to.
Proper cash flow management is essential in order to keep your business operating efficiently and growing toward your goals, and outsourced remittance processing can help achieve optimal operations, as it reduces mail float and can lower days sales outstanding (DSO).
Reduced Workload
When done by back-office staff and accounts receivable teams, check remittance processing can take an exceptional amount of time and labor to complete accurately. Your team members not only have to process the checks but also have to collect them and ensure accuracy throughout the data.
With third-party remittance payment processing, staff can focus instead on other tasks and maximize their productivity. Your stakeholders can gain peace of mind that qualified experts will be handling sensitive payment information.
Improved Customer Experience
Today’s customers expect to be able to pay with their preferred payment method. Although there is much conversation about the relevance of paper checks, they are still a prominent payment method, especially when it comes to select industries and services. By outsourcing remittance processing, your team can still accept check payments without putting additional pressure on your accounts receivable team.
Additionally, outsourced remittance processing also lowers errors in payment processing. This can greatly improve the customer payment experience, as their payment experience can be seamless, not requiring any additional attention once their payment is submitted. At FirsTech, we offer a Remote Image Archival System as a part of our Lockbox Solution Suite, which allows your team to search through and view payment activity and stubs for further customer support.
Lower Costs
By outsourcing remittance processing, your business can save money, since check remittance processing can be expensive. It can take much more time and labor than other payment channels, plus the purchase and upkeep of hardware and software like document scanners.
Additionally, outsourced check processing is less likely to be impacted by human error, as the payments are processed by skilled remittance specialists who utilize the most up-to-date tools. By optimizing your accounts receivable through third-party remittance processing, you create the opportunity to generate more revenue from your accounts receive process.
Check Payments in a Digital Age
Remittance processing plays a key role in the modern financial landscape. Today’s customers expect to be able to use their preferred payment channel, but check payments can be difficult for businesses to manage while avoiding fraud and theft. An outsourced remittance processor can help businesses overcome that.
On an organizational level, businesses of all industries feature remote and hybrid workplaces, which creates a challenge for the task of payment and check processing. Outsourced remittance processing answers the question of how to handle check payments with remote and hybrid workforces and ever-changing workplace structures.
Additionally, remittance processing services can serve as a vital pillar of a business continuity plan in the event of a disaster. A payment processing partner can quickly set up an alternative mailing location and begin handling remittance processing on behalf of an organization that is going through a crisis.
Discover Remittance Processing from FirsTech
Remittance processing is just one of many banking services offered by FirsTech. We help businesses revolutionize the payment processing experience for their customers through integrated access to unique payment solutions. Our technology enabled payment solutions drive customer loyalty with best-in-class payment and data transfer capabilities that are highly efficient and simple to manage.
To learn more about remittance processing services for your business, or to explore other services from FirsTech, get in touch with our team today.