Cheque Archival
Cheque Archival
Despite the fact that cheques have become less common in recent years, banks and other particular financial institutions keep seeking for better cheque archival systems.
This is very important since every piece of cheque from every single transaction will be required in the future as evidence of transaction or reference for verification, confirmation, or even rejection.
Even in some larger banks or financial institutions this piece of cheque must be delivered from branches to the head office. In such cases, banks usually hire delivery service from a courier or other outsourced companies, adding extra costs for transportation and total operating costs.
Unfortunately, that is not the only cost. Banks may suffer from more significant costs due to some issues potentially occurring on the way: as cheques can either be damaged or even lost. The absence of copy of the delivered cheque makes it difficult for banks to end any dispute, either internally or externally with customers.
Considering this, The Uniform Commercial Code, one of the uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions worldwide, requires banks to return the items paid to customers. In case the items are not returned to the customer or destroyed, banks are required to maintain the capacity to furnish legible copies of the items until the expiration of seven years after receipt of the items.
Manual Archival
Earlier, in the initial implementation of the Uniform Commercial Code, cheques were manually recorded and stored in the form of paper copies, microfilm, or microfiche.
However, it is undisputable that such manual recording and storing the cheques frequently result in ineffective business process. It is time-consuming and labour intensive: staff need to visually scan the paper files or go through numerous micro films with a magnifying glass.
1. Paper Copies
Before the more advanced technology came to application in the cheque processing and archival, banks archived the processed cheques by copying cheques and keeping them in a large storage room for about five years, or even longer. By maintaining the copies in such a way, banks can provide customers with sufficient information on the items paid through their accounts and track all cheques processed at banks.
The problem is that banks must provide special room or area for storage of paper copies. With the requirement that banks need to maintain the capacity to furnish legible copies of items until their expiration of seven years after receipt of the items, the capacity of the room or area must be upgraded over time.
Another problem is that banks must also spend extra cost for the maintenance of the storage area and, of course, for staff that are paid to copy, manage, and bring out the copies whenever required.
Archiving cheques in paper copies is unquestionably a costly process.
2. Microfiche or Microfilms
The costly cheque archival in paper copies had consequently led some banks and financial institutions to other alternative forms of manual archival: microfiche or microfilms. Not much different from the way of storing photographic films, cheques are scanned and then the images are stored as small films, too small to be read with the naked eye.
With a size of only 4-5 inches, microfiche brings more benefits as it allows for storage of more cheque copies in a small space. As long as the cabinet is located in a stable environment, the microfiche method is capable of long-term storage.
Similarly, microfilms that look like a reel of film can be used for more efficient cheque archival. Nevertheless, neither microfiche nor microfilms are as practical as expected. When it comes to retrieval of data, it needs a special microfiche or microfilms reader to help staff go through the collection of micro documents and identify them one by one.
Cheque archival with microfiche or microfilms remains time-consuming and labour intensive.
3. Manual Input of Cheque Details
In addition to recording and storing cheque images in hardcopies, microfiches, or microfilms, many banks assign staff to manually input the cheque details, including MICR-encoded information, into bank’s database.
Actually, this system is efficient as it only requires a computer unit to store more cheque copies. However, such tedious and energy-consuming manual handling often leads to misreading or mistyping of information that eventually result in recurrent dispute over data discrepancies.
Yes, banks probably apply particular verification system that allows staff to find copies of the cheque and compare them against the data input to the server. But, such effort will only add more cost and hinder the sustainability of business operation.
Automatic Archival
Thanks to the sustainable advances made in technology, all the setbacks encountered due to limited capability of manual archival are now overcome by the development of automatic archival. Integrated with MICR reader and scanner, it allows for automatic storage of both MICR-encoded information and cheque images.
Automatic archival is not only about automation on MICR code reading and cheque image scanning, but also about accuracy of the data, systematic archival, and effortless retrieval. To add more, this system allows for generation of report for business evaluation.