Printer Friendly

Is refund processing creating a bottleneck in your AR and AP departments? How outsourcing can help you increase efficiency, reallocate resources and reduce costs.


If your company processes refund checks, you know that these payments can create significant challenges for both your accounts receivable (AR) and accounts payable (AP) areas. In addition to consuming valuable and often scarce back office resources, the process for issuing refunds can cause your organization numerous problems, including:

Fraud exposure. If your organization is like most, your AR department is the area where credit balances originate and, therefore, it is also the department that initially identifies the need to issue refunds. Subsequently, the refund process crosses over into your AP area where payments are disbursed, tracked and reconciled. Without an invoice, how does your AP staff know that a refund request is valid? How does your AR team know when a refund is issued? In many cases, the lack of an integrated system of checks and balances that enables these areas to share information makes the process uncertain.

Returned mail. Another challenge inherent in the refund process stems from the prevalence of invalid addresses, which prevent refunds from reaching their intended recipients. The returned mail is sent to your AP area where it remains until someone can research your systems for new or correct addresses. If a new address is located, AP must then void the old check and reissue a new one--starting the process all over again. In cases where no address is found, AP will forward the payment details to the appropriate area where funds will be held until escheatment is required.


While there is no way to completely eradicate the need to issue refunds, the good news is that many of these challenges can be greatly reduced by outsourcing your process to a supplier who understands back office procedures and has experience in creating solutions for many of these same challenges. The best solutions replace as many manual steps from the process as possible with more efficient, repeatable and systemic electronic methods, including:

Process automation. By engaging a supplier who can receive an electronic file listing approved refunds, you can alleviate the need for your AP department to set up vendor records for each refund. Once the supplier receives the transaction information, each one can be imported into a database to facilitate tracking, followed by secure check printing and mailing of the refund to the appropriate customer.

The process is also faster since refund checks can be printed and mailed on the same or next day after the data is received; or on whatever schedule you require. A check register file can also be delivered to your AP or AR department to update your systems as necessary.

Data accessibility with Web tools. Using a Web interface to track each step of the automated payment process can enable your AP, AR or customer service departments to quickly assess the status of a refund check, making it easier to address customer inquiries. If desired, your payables system can be fed a daily paid check file to facilitate reconcilement or to clear the credit balances that are sitting on your books.

Audit-friendly controls. Your supplier should also be able to provide the latest fraud detection products, such as positive pay and payee name validation, for all checks. This means that each check presented for payment is verified for accuracy of the payee name, check serial number, amount and issue date.

You can then review and make more educated decisions about any items flagged as potentially fraudulent. You can also improve your ability to keep data confidential and secure by eliminating the manual process of passing data between areas.

Returned mail and escheatment processing. All returned mail should be directed to your supplier's processing site, thus alleviating your AP staff's need to spend time researching correct addresses. If a forwarding address is indicated, the check can be repackaged and sent to the new address.


A file of updated addresses can be provided to your accounting system to facilitate updates. All other undeliverable checks, or any checks that are still outstanding according to your stale-date parameters, can be automatically voided and associated information sent to your supplier's escheatment area for tracking, regulatory reporting and distribution of the funds.

Alternatively, if you have your own internal escheatment process, a transmission of the voided information could be delivered to you to assist in the activity.


By outsourcing these one-time payments to a specialist, you can devote more resources to:

* processing invoice-based payments;

* reducing manual-based processing costs;

* streamlining the pay-to-escheat process for these refund items;

* reducing external inquiries in your AP and AR areas; and

* improving AR information and tools to track your refund payments.


Although the issues associated with issuing refund checks often go undetected due to a lack of process ownership, they can combine to create some significant financial and reputation-related organizational risks. While refunds are a fact of life, an automated solution can help you reduce business risks.

As you seek to help your company operate more cost effectively and focus on the strategic aspects of your business, outsourcing your refund processing is an alternative worth investigating.

SourceNet Solutions is a division of The Bank of New York Mellon's Treasury Services Group. For a detailed discussion of refund processing, please contact Dan Reiff, SourceNet's senior vice president of Business Development, at 979 691 7800 for a personalized consultation about your organization's individual circumstances.

COPYRIGHT 2009 Summit Business Media
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2009 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:SPONSORED STATEMENT; accounts receivable; accounts payable
Author:Busch, Leon J.
Publication:Treasury & Risk
Geographic Code:1USA
Date:Jun 1, 2009
Previous Article:The ABCs of GRC: as regulatory risks loom, companies evaluate how to get more out of governance, risk and compliance software.
Next Article:Hasta la Vista? Sticking with the Windows XP system is becoming more complicated as the launch of Microsoft's newest operating system draws near.

Related Articles
What BPO Can Do.
Staying competitive: business process outsourcing is helping insurers drive value for core processes.
F & A outsourcing: what buyers are saying; Original research from an FEI member questionnaire details current views about outsourcing finance...
Drive: take control of your business' profitability.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters