The conventional wisdom has been that Check 21 would bring a certain degree of excitement to the otherwise tedious lockbox marketplace. Admittedly, that's not a particularly high hurdle to clear. But even before many Check 21 products have made it out of beta testing, enterprising bankers seem ready to stir things up on their own–and with data that has been sitting around just waiting to be made useful.
The data, of course, is from the lockbox itself–since besides being the repository of check-based remittances for client companies, it is also a collection point for vital information on trends in their accounts receivables. What bankers are proposing to do is leverage their databases and provide management reports with advice on how to collect sooner, manage customers better and ultimately improve cash flow.
Take, for instance, JPMorgan Chase, which now–thanks to its acquisition of Bank One–has a much-enhanced presence in lockbox. JPMorgan was expected to introduce a browser offering in late April that will take A/R data and spin it back to the client in report form. "We'll also use the data to compare a client's performance with industry norms–for example, point out that the client's DSO is two days better or worse than the industry average," says Dave D'Silva, senior vice president and receivables business executive for JPMorgan Chase Treasury Services. For the next generation of the browser expected out in the fourth quarter of this year, D'Silva says the bank plans to respond to treasurers' requests with invoice matching and event-driven notification as well. "Treasurers are asking us to match incoming payments and remittance advices to invoices and then send them the results," D'Silva says. It will also allow treasurers to see all their collections, including wires and ACHs, consolidated on the browser platform. "It's really turning the traditional lockbox into a receivables-management engine," D'Silva says.
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Whether because of Check 21 or the fact that rising interest rates may bring float back as a concern or just because companies are more diligently trying to improve cash flow, the arena of the lockbox is more active than usual with major players offering enhancements to CFOs and treasurers that promise to help them improve their ability to manage and predict their A/R performance. For JPMorgan, the timing is good since it had to reconfigure its lockbox offering anyway after the Bank One merger. But other major players are also looking to augment as well. "Banks have been good at marshalling lockbox data for their own uses, to make their lockbox operations more efficient, but they've been slow to package it in ways that make it truly useful–tactically and strategically–to corporate treasurers and working capital managers," notes consultant Craig Jeffery, head of Atlanta-based Strategic Treasurer. "The potential is there, but it's just starting to surface at a few institutions."
Other major lockbox providers also see the potential in the accounts receivable space. "With both image and paper processing established, we're trying to take it to the next level," reports Shena Corbett-Worthy, vice president and product manager for wholesale/wholetail lockbox products at Wachovia Bank. For Wachovia, that means offering integrated receivables management, incorporating incoming payments of all forms and producing reports that show trends and deficiencies as well as transaction volumes. "The goal is to highlight ways [treasurers] can make their receivables strategy more productive and accelerate collections," she says.
SLOWLY MAKING A MARK
And it's not as if Check 21 has had no impact. Thanks to remote deposit–the one area that has seen the introduction of new products–it is possible to deposit checks remotely into a lockbox account for lockbox handling and reporting. When a check is handed to a representative or mailed to a company office, it can be scanned and sent electronically to the lockbox for processing and deposit, almost instantly and at very little cost, says Steve Stone, senior vice president for treasury operations at PNC Corp. The bank can also streamline check clearing and deposit procedures. "We have a lockbox operation in Los Angeles but no bank there, so we take checks to a local bank for deposit and clearing," he illustrates. "Under Check 21, we could have them all presented electronically in Pittsburgh."
Integrating remote deposit with lockbox processing is in full swing, pilot and post-pilot, Stone says. But having the payer scan and transmit a check either to the payee or the payee's lockbox has not yet appeared, he reports. "We'd have concerns about liabilities and warranties if we were receiving a check image transmission from a party we did not know. Check 21 changes who's responsible for determining authenticity and making the pay or no-pay decision."
Still, Carl N. Thornrose, vice president in Bank of America's Global Treasury Services unit–the biggest U.S. lockbox provider–cautions that remote deposit is still just taking "baby steps" at this point. So, stay tuned for more.
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