Even with the advent of electronic and internet payments, most business-to-business payments made in the U.S. are still made by paper check. However, paper checks have many drawbacks, including storage cost and space, as well as the time it takes to return checks and have access to funds. But legislation proposed by Congress may stimulate the adoption of check imaging by banks and provide some great benefits to businesses. How will this impact your company?

The Movement to Check Imaging

Although Federal law currently requires banks to exchange paper copies of checks, legislation being considered by Congress may change that. As of June 24, 2003, the legislation, commonly known as Check 21 and the Check Truncation Act, is gaining momentum.

It allows banks to exchange electronic images over networks rather than paper checks, completely automating the clearing process. The legislation started slowly but has picked up speed and more proponents in response to the September 11th terrorist attacks that shut down the nation’s air space and significantly impacted the delivery of paper checks for processing between banks.

Many banks, including Comerica, have already adopted online and CD-ROM check imaging for their business customers as an alternative to returning paper checks to them. The check image shows the front and back of each check, including the signature and often the endorsement. For added convenience, single or multiple check images can be retrieved by a variety of criteria, such as account number, check number and posting date.

The new process is providing a number of cost and time-saving advantages to businesses.

Expedited Information

Clearing check images will speed up the time it takes to receive information on returned checks. With the paper check process, it takes six to seven days for a business to know it has returned items. According to Chris DiBartolomeo, Image Services Product Manager for Comerica’s Treasury Management Group, “Clearing check images will allow businesses to know about and see items in just two to three days. They’ll know sooner whether a person is passing bad checks or if there’s a disputed payment, so they can address the problem and work on retrieving their funds faster.”

More Convenient Check Storage

The storage and management of paper checks have always created a significant effort and expense for businesses. Check imaging virtually eliminates the need for storage because 12,000 to 30,000 check images can be stored on a single CD-ROM. What’s more, several years of check images can be kept in a single three-ring binder.

“The real beauty of it is that businesses can benefit from the simplicity of a paperless office without sacrificing security,” reassures Bridgit Chayt, First Vice President and Group Manager of Corporate Products for Comerica. “Comerica provides check backup for seven years, which means our business customers can get a copy of their checks any time they need to.”

Streamlined Operating Processes

Businesses can receive check images to speed up account reconciliation. Convenient CD-ROM indexing can save hours of time in researching and filing checks because the indexing can be sorted by date paid, dollar amount or check number. What’s more, if there’s a customer question or dispute about a check, businesses can attach a copy of the check image in a customer form letter and send it through regular mail or email.

Faster Dispute Resolution

For businesses that use lockboxes, check imaging can quickly resolve payment, coupon and invoice disputes by providing a fast and easy way to research check numbers, dollar amounts and payment dates. An image offers quick and decisive proof to clear up any questions or discrepancies that arise between a business and its customers. Check imaging also expedites reconcilement and is a valuable tool for improving collections.

Improved Fraud Detection

“For large businesses like insurance companies that have numerous checking accounts for payroll, insurance claims and rebates — as well as hundreds of people with access to those accounts — check imaging is a godsend,” states DiBartolomeo. “On the next business day, these businesses can now review their checks for anything suspicious, such as numbers that are out of sequence, different check stock or an endorsement signature or payee name they don’t recognize.”

Check imaging also enhances positive pay services, which provide reports that identify potentially fraudulent checks by comparing the serial numbers and dollar amounts of posted checks with a business' issued checks. If there’s a question about a check, the business can simply click on the check image then decide whether or not to pay it.

Any Size Business Can Benefit

"It's unfortunate that many small and middle market companies think services such as check imaging only make sense for Fortune 500 companies. The truth is they can often realize greater efficiencies and cost savings than their larger counterparts,” emphasizes Chayt. “Check imaging allows smaller companies to grow their businesses without increasing overhead."

This article appeared in Crain's Detroit Business, May 2003. (CO)

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the ManzellaReport.com, is a world-recognized speaker, author of several books, and a nationally syndicated columnist on global business, trade policy, and economic trends. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.

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Talkback (1)

  • Guest (ThomasMaloney)


    Technology is readily available today so it is only wise for businesses to take full advantage of it toward their personal gains. Almost every single business operation is going digital these days to avoid the additional costs for physical labour to handle the documentation and to operate a facility.

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