Accepting physical checks is an important aspect of a business’ receivables and cash flow management. For most though, the process is generally time consuming, inefficient, and error prone.
A bit of history
Remote deposit capture became popular as an alternative to in-person, night drop, deposit-by-mail, and lockbox solutions around 2004 when the “Check 21” legislation was implemented.
The Check Clearing for the 21st Century Act allows banks to use scanned copies of paper checks as electronic substitutes. This is the reason consumers have mobile phone deposit options today, and why businesses can use remote deposit capture solutions to streamline receivables.
The remote deposit workflow
Remote deposit capture solutions are designed for businesses that receive physical check payments on a regular basis. Most major retail and commercial banks offer a service, hardware, and software allowing businesses to scan physical checks right from the office for deposit to their account.
The accounts receivable workflow is generally similar to a regular bank deposit, except there’s no teller and the business holds on to the physical checks.
It goes something like this:
- A business receives checks from the customer in-person or, more commonly, via mail delivery to a payment collection address.
- Each check is recorded onto a deposit slip, usually via an online deposit portal provided by the bank or using locally installed software.
- An employee endorses each check with a signature and deposit account information.
- Each check is scanned for validation and deposit using the scanner provided by the bank.
- An employee reconciles the deposit slip, validating that the total matches all of the individual check amounts, then submits the deposit.
- All of the physical checks are stored on-premises until the deposit clears.
- Finally, the Accounting team records transactions manually, often relying on manual tracking to associate individual checks in a deposit to invoices.
This workflow is a lot better than the traditional process for in-person business check deposits, which often leads to piles of checks on an employee’s desk, spreadsheets tracking multi-check deposits, and even lost or misplaced checks.
Remote deposit capture check scanners overview
Remote check deposit solutions differ from traditional, in-person deposits in a few key ways:
- You don’t need to go to the bank.
- You might have extended deposit cutoff times, this varies by bank and service tier.
- There are deposit limits per day, week, month and often per check.
- All of the scanning and storage work is done by your employees, instead of the bank’s.
- Your business owns and maintains check scanners, and likely software as well.
The physical check scanner is probably the most jarring difference for most businesses. Banks take different routes with this, but generally you can lease a scanner from the bank for a monthly fee.
Many banks will offer multiple tiers of check scanners as well, ranging in functionality from single feed to multi-feed with electronic endorsement. Whichever option you choose, the maintenance is usually your responsibility.
Some banks will accept check images from any scanner, including standard desktop office scanners. There tend to be more restrictions around these images though, such as lower deposit limits.
Businesses can also choose to purchase check scanners from a third-party, but compatibility varies by bank and any support issues are then squarely on the business to handle.
There are four major manufacturers of scanners: Panini, Digital Check, Magtek, and Epson.
Many of their models can be purchased online either new or refurbished from licensed dealers. Pricing ranges from hundreds to thousands of dollars, but the typical single-feed model a bank will lease you usually runs in the $300 range.
Check scanners are both a blessing and a curse. They enable remote deposit, which is a huge upgrade to typical check deposit and more affordable than lockbox services. Yet, they come with their own baggage too.
Benefits and pitfalls of remote check deposit
There are some really clear advantages that come with remote deposit capture, and also some common issues your employees will have to deal with.
First, the benefits…
Extended deposit hours - you can submit deposits at anytime, but the real advantage is having a later cutoff for the deposit to considered for same day processing. This varies by bank, but it’s usually after normal business hours and occasionally as late as 11:59PM on the day of.
Check images - a check scanner is uniquely suited to scanning paper checks, and it’s one less item for your employees to scan for your internal digital records.
Cheaper processing costs - no more trips to the bank during business hours, and less data entry if your scanner and bank support field extraction from the scan.
Now, some of the issues…
Deposit limits - unlike in-person, remote deposit solutions generally place restrictions on deposit amounts by check, week, and month. Limits vary by bank and service tier, but regardless some deposits won’t be eligible.
Hardware and software to maintain - your business is responsible for scanning, data entry, and maintenance. That means additional IT resources needed to run remote deposit.
No content scans or OCR - you’ll get scans of the checks, but that’s it. Remote deposit doesn’t solve the inefficiency of scanning attachments or payment coupons manually.
More physical copies to store - since you’re submitted deposits with check scans, your business is now responsible for safekeeping of the physical checks until the deposits clear.
Remote Deposit Capture Alternatives
The most common alternatives to remote deposit capture products are lockbox services, and mail automation services.
Lockbox services are generally offered by most retail and commercial banks. They tend to be expensive and targeted toward businesses with revenues in excess of $20MM annually.
Mail automation services, such as CheckStream by Earth Class Mail, are much more scalable and cost effective than lockboxes. CheckStream also shares many of the advantages of both lockbox and remote deposit solutions.
You can check out this remote deposit comparison table for more details on your options.
Remote Check Deposit Options
If your business wants to explore remote check deposit, there are a few different companies to consider. Here are four commercial bank options:
Chase Bank offers a choice of single and multi-feed scanners for their remote deposit customers.
The single-feed scanner plan costs $25 per month and is recommended for businesses with no more than 15 checks per week and 10 checks per deposit. The multi-feed plan costs $50 per month, and allows for scanning of up to 50 checks at a time.
Both plans work with the free Chase Mobile App and require a two year contract.
Pros - A generous deposit cutoff time at 11 PM ET for same day processing.
Cons - Long term contract with cancellation fees, and ongoing scanner maintenance.
Bank of America Remote Deposit Capture
Bank of America’s remote check deposit service starts at $15 a month. Participating Bank of America Business Banking customers are sent a check scanner, and the “ideal” number of deposits for each customer is up to 125 per month. Bank of America also requires a contract and additional qualification criteria before you can use the service.
Pros - One of the lowest prices options compared to similar bank offerings. Broader scanner support so you have more options if you choose to buy your own.
Cons - Businesses need to meet certain qualification criteria before they can subscribe and begin the service. Plus there’s a long term contract with early cancellation fees.
U.S. Bank Remote Check Deposit Solutions
U.S. Bank offers three remote check scanning options for business owners to choose from, along with a point-of-sale Check and Card Solution. The bank recommends mobile deposits via the U.S. Bank app for sole proprietors, a Deposit Express scanner for businesses with moderate volume, and an On-Site Electronic Scanner for businesses with high volumes of deposits.
Pros - Businesses with very low volumes of checks can use their smartphone or iPad for deposit and therefore don’t need a digital scanner.
Cons - A separate application is required to process and submit deposits, and accounting integrations are limited to recording transactions is a separate workflow.
PNC Remote Deposit Solutions
PNC offers three remote deposit solutions for their business banking customers. Businesses with low transaction volume can use PNC’s mobile app to make deposits for $1 each and no base monthly fee. A digital scanner is sent to businesses for free with the DepositNow Web and DepositNow Express contract plans, and the Express plan allows businesses to save photocopies of checks for up to 13 months.
Pros - Ability to have an unlimited number of accounts that can receive deposits. Medium and large deposit volume plans offer electronic check endorsement.
Cons - No solution that includes attachment or coupon scanning, and you’re locked into a specific branch for your deposit account.