How We Found a Fresh Approach to Handling Stale Checks

How We Found a Fresh Approach to Handling Stale Checks

My colleague recently wrote about how Nvoicepay’s payment modification team handles payment errors at scale using technology and process innovation. When it comes to error resolution, we have a significant advantage over most accounts payable departments in that our dedicated engineering team identifies snags in our process and builds tools to streamline it. As a payment automation provider, this efficiency bolsters our customer’s success.

Resolving stale checks for our customers comes to mind as an area in which we have significantly improved. About 80 percent of our customers’ suppliers have transitioned to receiving electronic payments through either Virtual Card Number (VCN) or ACH, but some back offices still find paper checks more accommodating. Customers appreciate our flexibility towards their suppliers’ needs, and it’s often the deciding factor for new customers who decide to implement Nvoicepay’s solution.

The irony was: Even though our overall percentage of check payments shrank, the absolute number of checks kept growing as more customers took advantage of our services. We quickly found ourselves in the trenches along with every AP team across the U.S. This gave us the unique opportunity to find ways to develop our solution to its fullest potential.

Finding the Opportunity

Although, by law, a check becomes invalid after six months, we define a check as “stale” (unlikely to be cashed by the recipient) after 60 days from the date of issue. Stale checks interfere with effective cash management and balance sheet accuracy, so we want to resolve them promptly for our customers.

Before we made this process scalable, we would ask our team to come in on Saturdays to resolve stale checks—in those days, we could get through about 800 checks a month, manually. This created a very reactive, unscalable process. Thanks to our engineers and some outside-of-the-box thinking, our automated system enables a single person to handle about 1,500-2,000 stale checks a month.

This experience opened our eyes to our customers’ pain. It’s nearly impossible to consider growing a company with such manual processes. Companies that have tried end up adding headcount for the sole purpose of handling tedious, manual work—not scaleable at all.

How We Scaled Our Solution

We started by drafting a basic process, similar to what AP departments follow:

  1. Download a list of all the stale checks.
  2. Confirm with the bank whether attempts were made to cash the checks.
  3. Issue the refunds for the remaining checks.

Step two can be particularly challenging, depending on each bank’s capabilities. Most banks’ portals weren’t built within the last decade and require each check to be researched one at a time. Depending on the payment volume, this can be a painfully time-consuming process—and one that we realized we could automate. Now we can run that process for all stale checks in the same amount of time it used to take for just one check manually.

Finally, we bought everyone on our team a programmable computer mouse that carries out the most common click sequences at the touch of a button. This way, our team can breeze through manual tasks and focus on more meaningful ones—and protect against carpal tunnel!

Winning Back Time

Error resolution is one of the costliest, least value-added parts of the B2B payment process. Because we take responsibility for all payment errors on behalf of our customers, we’ve invested in optimizing every area of the error resolution process. By doing this, we’ve achieved an error rate of less than one percent.  

Stale checks are just a fraction of the payments that our payment modification team handles, but turning that absurd process into one that only takes a couple of hours per week has had a positive effect on our team. We handle more modifications without a corresponding increase in staff. And the staff we do have contribute to the continued improvement of our efficiency and accuracy. And no one has to work on Saturdays.

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