Wholesale payments usually settle an invoice or group of invoices. If no match is made from the available scannable documents or remittance information, Henry Schein's accounts receivable staff does it, working on screen from images captured by the bank and accessible 24/7 on the bank's iTelecash/TreasuryEdge Web site, Ingoglia explains.

"We have a staff here that resolves and applies the exception items, using the images and a large monitor," he says. "They tile their screens so the remittance images are on the left and our A/R system to the right. They've learned which fields to search.

"It's still work," he notes, "but we keep streamlining it."

To make matches, A/R staffers look for invoice numbers but also try to match payment amounts and check MICR numbers, he explains. "If we can't always readily determine the right invoices, at least we can make sure we apply it to the right accounts."

That skill commands respect at the bank. Henry Schein is "certainly among our most successful lockbox users," says Alan Evanish, senior receivables product manager at BNY Mellon Treasury Services. "They're very focused on improving their hit rate and seeking to apply best practices. They're looking for continuous improvement and are open to suggestions."

In Overland Park, Kan., YRC Worldwide uses a bank lockbox for check payments. YRC's bank scans remittance documents but doesn't do the data capture. "We capture the data in our shop using third-party software for significantly less than we would pay the bank to capture it," says Darrin Brown, manager of revenue management at the $4.3 billion freight carrier. "It's pretty efficient."

Whether it's done in-house or at a bank, the leading edge of automated wholesale lockbox operations is straight-through reconciliation that uses intelligent character recognition (ICR) to capture data and artificial intelligence to match payments to open receivables up to 95% of the time, says Rodney Gardner, head of global receivables at Bank of America Merrill Lynch.

Give your bank access to your A/R system, Gardner advises, and let the bank's system figure out what your customer is paying for, even when there is no perfect match such as a list of invoice numbers being paid in full by the check.

"The bank's system may discover that the payment matches the amount of 65 invoices during a 30-day period minus one deduction for a mis-shipment and a 2% deduction for 27 invoices that were paid within 10 days," he explains. "Those systems process all the available data to figure out what the customer most likely intended. You can review the bank's matches and then push a button to close out the open receivables. When automated matching can reach 95%, it's pretty efficient for staff to concentrate on just the less manageable 5%."

BofA is not hitting 95% today as a rule, Gardner concedes, but he predicts it will come close when its second-generation matching system is introduced in midyear, starting in Asia. Steady improvement in ICR has made misreads extremely rare, he notes. "I wanted to see one at our keying site in the Philippines, but it took half a day before even one came up."

Demand for sophisticated matching service from banks is spreading from large corporations to the middle market, reports Jeff Siekman, vice president and director of treasury products for Fifth Third Bank.

Upper middle-market treasuries still appreciate data capture by bank keying and data transmission, but they're starting to ask for smarter application to A/R to minimize exceptions and manual posting, Siekman says.

"We'll take their A/R file and match the receipts from multiple channels, including electronic bill-pay," he says. The bank does smart matching today for select clients and expects to roll out a comprehensive smart-matching program to all clients by midyear, he says.

Smarter matching is a modest advance in a service—wholesale lockbox—that generally is stagnant and shrinking, notes Paul LaRock, a principal at consultancy Treasury Strategies. "The leaders are trying to move away from receiving check payments to being paid by ACH," he says. "Lockbox technology hasn't changed much, but we're seeing practice catch up to tools that have been available."

Lockbox technology may not be brand new but it has worked well enough to narrow the efficiency gap between paper and electronic payments, notes Greg Cicero, another principal at Treasury Strategies. "Electronic payments still win," he says, "but lockbox efficiency has lessened the urgency in many treasuries to convert customers. We won't see the end of paper checks, especially B2B checks, any time soon."

Processing costs now take a back seat to liquidity and working capital management, Cicero notes. "Treasury staffs are doing all they can to capture the information and post the payment as quickly as possible."

The business case for lockbox automation typically involves expense reduction, but the real endgame is capturing more data and gaining more insight into the data, agrees Donovan Shand, vice president for global corporate product management at Comerica Bank.

"That feeds better working capital management," he says, "and allows a treasury staff to be more strategic."

Read about how the Postal Service's consolidation will affect corporate payments here.  

For an earlier story by Richard Gamble about how streamlined systems let health benefits administrator SHPS deftly process a surge in payments, see Beefing Up Payment Systems.