Products Flashcards
What are 5 different types of check product services?
Lockbox Services
Account Reconciliation Products (ARP)
Positive Pay Products
Controlled Disbursements
Image Cash Letter
What are Lockbox Services?
Bank or third party receives mail at a specified post office box
Processes enclosed remittances
Deposits to Payee’s account
What benefits are there to Lockbox services?
Faster Collection
Access to payments information for items accepted through the lockbox to better
serve customers
Payments Concentration: Centralized remittance processing speeds up
deposits/improves cash flow
What is Account Reconciliation (ARP)
Banks reconcile statement of checks paid and deposits made with goal of increasing amount of information available and decreasing amount of work in company’s accounting department
sorting of paid checks in check number order
Customer notifies banks of checks written and banks supply statement listing activity, including checks outstanding
What are the range of services for Account Reconciliation?
Multiple accounts
- Schedule defined by customer - daily, weekly, monthly
Full reconciliation:
Partial Reconciliation
Deposit Reconciliation
What is full reconciliation?
An Account Reconciliation service in which Customer provides bank data on checks issued
o FI matches data against checks cleared
o Customer receives reconciliation reports including checks paid, outstanding items and exceptions
What is Partial Reconciliation?
An Account Reconciliation service in which Customer receives report of items paid sorted by customer’s instructions.
What is Deposit Reconciliation
Account Reconciliation service in which allows customer to maintain one account and have deposits from multiple business locations
What are all of the different positive pay products?
Positive Pay
Reverse Positive Pay
Payee Positive Pay
What is Positive Pay?
Bank can automatically match each check
presented against list of checks issued by the
customer
What is Reverse Positive Pay?
Bank sends to the company a listing of checks presented
The company compares the information to its
internal records
What is Payee Positive Pay?
Matches payee name from issue file to payee
name on checks
What is Controlled Disbursement?
It is a corporate cash management product
Designed to manage cash flow and maximize investments
Provides customer with information early day of total amount of checks that will clear
What is the basic process of Controlled Disbursement?
Early notification of amount needed in disbursement account
Funds to equal total disbursements provided via a funding account
Customer can identify excess cash for investments or other needs
Early notification is key
What are the benefits of Controlled Disbursement?
Reduction of idle balances
Timely notification on daily account funding need
Reduced borrowing costs
Manage check-clearing risk and/or reduce or eliminate overdraft
Potential fraud reductions
Shat are seven different types of checks?
Certified check
Government check
Money Order
Traveler’s check
Payable Through Draft
Remotely Created Check
Warrants
Certified
Check
Defined in Reg CC
o Issuing bank takes the check amount from drawer’s account and sets aside
Bank will pay upon presentment (used infrequently today)
Government
Check
Demand draft drawn by U.S. government on itself (on U.S. Treasury) or drawn on state government or unit
of general local government
o Not payable through or at a bank
o Generally regarded as checks even though not drawn on a bank
Money
Order
Draft purchased from financial institution, U.S. Post Office or sales agent
o To pay a debt or transfer funds
o Available through U.S. Postal Service/other providers (MoneyGram and Western Union)
Traveler’s
Check
Payable on demand, drawn on or payable at or through a bank
* Requires, as a condition of payment, a countersignature by person whose specimen signature appears on
instrument
* While some institutions offer physical checks, many now offer alternatives (Visa, MasterCard prepaid cards)
Payable
Through Draft
Draft that is payable through a specific bank printed on face of draft, but
* Drawn on issuer, not the bank: Funds drawn from issuer’s account
* Payable through another entity or financial institution
o Example: Insurance company issues payable-through draft to pay a claim
Remotely
Created
Check
Check that is not created by the paying bank and does not bear signature of person on whose account the check
is drawn (an unsigned draft)
o Example: Account holder authorizes a payee to draw a check on their account payable to that payee
What are Warrants
Negotiable instrument issued by state or local government agencies
* Drawn against the state or local government’s treasury to disburse funds
* Registered Warrant: Promise to pay at some point in the future (not a check)
oPromise to be paid a specific amount at a later date with interest
oUnique RT numbers assigned to identify them
oExample: State of California issued registered warrants several years ago to pay state’s obligations
Substitute Check
Image of front and bacnk of the original check. Has MICR line with all information from original check
Conforms to x9.100-140.
Note: IRD and Substitute the same.
What UCC rules is a cashier check’s guaranteed obligation of the bank and penalties for wrongfully refusing payment noted in?
3-411. REFUSAL TO PAY CASHIER’S CHECKS, TELLER’S CHECKS, AND CERTIFIED CHECKS
Who can sign a Declaration of Loss?
must be signed by either remitter or payee. It may depend on who had possession of the check at the time it was lost
However, there is no obligation that it’s one or the other, but a declaration of loss must be provided. Any decision to require
the payee to also sign a declaration of loss would be a business decision, but for practicality, its usually always the remitter
Who is the claimant in the declaration of loss process?
Person who claims right to receive amount of cashier’s check (or teller’s check, or certified
check) that was lost, destroyed, or stolen
who is the obligated bank in the declaration of loss process?
Issuer of cashiers check
Who is the remitter in a declaration of loss process?
the person who purchases the cashier check from the issuing bank.
What UCC code details the declaration of loss process?
UCC 3-312
3-312. LOST, DESTROYED, OR STOLEN CASHIER’S CHECK, TELLER’S CHECK, OR CERTIFIED CHECK.
What does UCC 3-312 detail?
Declaration of loss process,
Statute of limitations means that the claimant makes a claim within 3 years if check meets the following conditions: 1.the person making the claim must be either the remitter or
payee of the cashier check. 2. Must include a declaration of loss. 3. the claimer cannot obtain possesion of the check becuase it’s lost or destroyed or someone else who shold
not have it, has it 4. Must be received before the check has cleared. If the check has cleared, then not much that can be done.
TimeLine for a declaration of lss
Claim enforceable at the later of:
Time claim is asserted; or 90th day following date of check
Earliest date lost/stolen claim is enforceable = 90th day after issue date
Note: If check is returned prior to 90 days, claiment has holder in due course rights. .
How is a Warrant proecssed?
Issued by state or local government agencies:
Treated as checks if they are payable on demand
▪
Many are actually payable-through-drafts
▪
Registered Warrants - Not a check/promise to pay (IOU)
What are noncash items?
items that are Generally, not eligible for image exchange
Defined by Reg CC §229.2(u) as:
▪ Item that would otherwise be a check, except that a passbook, certificate or OTHER DOCUMENT is attached;
✓ Is accompanied by SPECIAL INSTRUCTIONS such as a request for special advice of payment or dishonor;
✓ Consists of more than a single THICKNESS of paper
⧫ Except a check that qualifies for handling by automated check processing equipment
✓ Has not been preprinted or post-encoded in MAGNETIC INK with the routing number of the paying bank
✓ Is a FOREIGN ITEM
What are examples of Cash Management products?
Reporting
Receivable Processing
Disbursement
Account Reconciliation Products ARP
Controlled Disbursement
What is Reporting?
Cash management product:
Balance Reporting
Zero Balance Accounting –
Balance Reporting
A subtype of a type of cash management product called Reporting.
Secure, internet-based reporting of account and transaction information at a customer’s lead ban
Example: For example, may include balances in foreign currencies, balances at other banks, information on cash positions and float, or investments
Zero Balance Accounting
A subtype of a type of cash management product called Reporting
Designed for customers who fund decentralized accounts from a central main account
As debits are charged to ZBAs, funds automatically transfer from the master account to cover the debit and bring the sub-account balance to zero
▪May also be referred to as sweep accounts
What is Receivable Processing?
A type of Cash Management product that includes services such as:
Lockbox
which entails Retail Lockbox and Wholesale Lockbox.
What are different types of Lockbox services and what is a lockbox?
Lockbox is a subtype of a Receivable processing product which is a type of cash management product.
IN short: Cash management service offered by banks to customers to expedite receivables processing
Retail Lockbox
Wholesale lockbox
What is retail lockbox and who benefits from it?
Companies, such as utilities, that receive a high volume of payments via checks in the mail
✓
May include a check and a remit advice/stub which can be processed/captured in an automated process
What is Wholesale Lockbox and who benefits from it?
Wholesale Lockbox - Companies with small numbers of payments, sometimes with detailed requirements for processing, such as a doctor’s or dentist’s office - supports non-standard forms
What are key differences between wholesale lockbox and retail lockbox?
Retail benefits companies who receive HIGH VOLUME of payments.
Examples: Utilities company.
Wholesale benefits companies who receive SMALL VOLUME of payments. Example: doctors offices,
What is Account Reconciliation Products (ARP), the different types of services, and what is the primary goal of it?
It is a type of cash management product in which bank offers reconcilement services.
The goal is to Increase amount of information and decrease amount of work in company’s accounting
- Full Reconciliation
- Partial REconciliation
- Deposit Reconciliation
- Positive Pay Services
- Reverse Positive Pay Services
- Controlled Disbursement
What is Full Reconciliation?
A type of Account Reconciliation Product ARP in which:
Customer provides the banks the data on the checks issued
Bank matches that data against the checks that cleared their account
Customer receives reconciliation reports including checks paid, outstanding items and exceptions
What is Partial Reconciliation?
A type of Account Reconciliation Product ARP in which:
Customer receives a report of the items paid sorted usually by the customer’s instructions
What is Deposit Reconciliation?
A type of Account Reconciliation Product ARP in which:
Allows customer to maintain one account but have deposits from multiple business locations
What are Positive Pay services?
Positive Pay Services are themselves types of Account Reconciliation services. There are three main types.
Positive Pay
Payee Positive Pay
Reverse Positive Pay
What is positive pay?
Service where the bank automatically matches each check presented against amount and check number on listing of checks issued
What is Reverse Positive Pay?
Service where bank sends information on checks to be posted to the customer and the customer compares each amount and check number to its listing of checks issued
Allows customer to monitor and review checks.
What is Payee Positive Pay:
Service that matches the payee name from the issue file to the payee name on the check
Benefits: Bank reviews and flags checks that may be fraudulent (not on the listing of checks issued) and alerts the customer for decision to pay/not pay
What is Controlled Disbursement?
It is a type of cash management product, an Account Reconciliation service in which allows?
Daily report provided early in the day to the customer detailing the amount of disbursements that will be charged to the account that day
Benefits of Controlled Disbursement include?
Timely notification of daily funds needed
Reporting of funds that are transferred
Reduction of idle balances
Increased interest income from short term borrowing
Reduced borrowing costs
