Columbia Forest Products has two primary cash management goals. "One is to gain use of incoming cash as quickly as possible," says Steve Shropshire, Assistant Corporate Controller. "The other is to funnel all cash deposits into a master funding account."
The goals are simple enough. But the nature of the Greensboro, NC-based company's business presents a challenge: A manufacturer of hardwood plywood and hardwood veneer products, Columbia has remote mill sites across the country that were selected based on their proximity to trees - rather than big cities with lots of bank branches.
Since moving its treasury management services business last May to First Tennessee Bank, Columbia has been implementing and exploring collection and deposit solutions that help address this challenge.
Most Columbia customers are distributors and original equipment manufacturers (OEMs), such as furniture and cabinet makers. Invoices range from $1,000 to more than $100,000, says Jeff Spatz, Corporate Credit Manager. To collect about 600 check payments a month from customers across the country, Columbia implemented separate First Tennessee wholesale lockboxes in Charlotte, NC, for its plywood and veneer divisions.
"Customers mail their checks anywhere from 10 days from invoice to 30+ days after the invoice date, and based on this it is more efficient to have them mailed to a central location where they are deposited immediately as they are received," Spatz says.
In its most recent mail study, cash management research and consulting firm Phoenix-Hecht ranks Charlotte as the country's third best collection point based on total float (average mail collection time and float assignment). Spatz says Columbia is also benefiting from the greater personal attention its lockbox business receives from First Tennessee. "The same person handles our account, is more familiar with our business and can spot irregular items," he says. "With our previous bank, many people handled the day-to-day items and we became more of a number than a business partner."
First Tennessee notifies Columbia twice a day when deposits are completed and images of the checks, envelopes and other remittance documents are available for online viewing. Columbia keys information from the images to apply the cash.
Columbia plans to initiate a daily lockbox data transmission from First Tennessee that will automatically apply payments to its accounts receivable system, saving staff time and speeding the payment posting process. The company will receive a monthly CD-ROM with the lockbox images organized by date, which will cut down on paper storage and increase research efficiency, Spatz says.
Online bill payment
To further speed incoming cash, Columbia is also considering adopting Electronic Bill Payment. The service would enable customers to make payments online from Columbia's Web site by providing checking account information.
The customers most likely to pay online would be smaller businesses as well as employees who purchase Columbia goods, Spatz says. "This option also would be helpful in collecting payments from customers who are on credit hold for past-due items, when we need a payment to release new orders."
Remote deposit capture
Neither Columbia's Greensboro headquarters nor its mills in Oregon, West Virginia, North Carolina and Vermont are near a First Tennessee branch. In fact, the mills are in remote locations near very few banks. So how can the company deposit checks into a First Tennessee account when they are mailed to or dropped off at one of these locations - and achieve the goal of quick access to cash?
The answer is remote deposit capture (RDC). Both headquarters and each mill location now have an RDC scanner to enable staff to transmit images of checks to First Tennessee for deposit, rather than forwarding them by mail or courier to a lockbox in Charlotte. "If we scan a check today, we generally have access to the cash tomorrow," Shropshire says. "We remotely deposit 100 to 150 checks a month."
Shropshire notes that keeping on site checks that have already been scanned and deposited has inherent risks, including the potential for duplicate deposits. However, Columbia is addressing these risks by employing RDCheckTrack™, a device available through First Tennessee that's designed to securely store and track RDC-scanned checks.
RDCheckTrack is a cabinet fastened with a laptop-style cable lock and a storage capacity of about 2,400 checks among three bins. At Columbia, to segregate duties, one person at each location scans RDC checks and a second person at the location drops them into a slot in the storage device. A timer within each device keeps track of storage time and reminds Columbia staff when they should rotate the bins and destroy the oldest checks.
"If we didn't have a secure way to house those checks, we wouldn't use remote deposit capture," Shropshire says.
The missing piece
"Remote deposit capture complements our lockbox service and is a great way to deposit funds when you don't have a lot of local bank accounts," Shropshire says.
RDC has enabled Columbia to meet its goal of funneling all cash deposits into a master funding account, Shropshire says. "Previously, we had funds from lockbox and our wire account sweeping into our master account," he says. "Being able to do the same with our non-lockbox checks was the missing piece in our program."
For more information about RDC or RDCheckTrack from First Tennessee, contact your Treasury Management Sales Officer or Relationship Manager.