Powering Up Electronic Payments with the ACH Network€¦ · Streamlining and updating this payment...
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The Challenge At the beginning of 2014, the Public Utility Commission of Ohio began requiring Duke Energy to collect late fees on payments received 21 days after the utility bill was issued. This had previously been waived for municipalities. The City of Cincinnati’s payment procedure was unable to issue payment within the new timeline. A new process was required if the City was to comply with the deadline and avoid late fees. Coordinating faster payment of more than 580 energy bills for 14 different departments, offices, and programs across the city government proved to be a challenge. The City had to reimagine its entire approach to ensure the payments were made on time. The Opportunity The Office of Performance and Data Analytics convened an interdepartmental “Innovation Lab”, which utilized LEAN process improvement tools to identify the problem and outline a solution. The Innovation Lab process helped identify bottlenecks and delays and began to implement best management practices to reduce the approval and payment processes to ensure bills are paid on time. This process improvement exercise also identified the need to make the payment procedure digital, which will help prevent payment errors as well as save significant time and resources. The ACH (Automated Clearing House) Solution Duke Energy was on board to implement the new electronic payments strategy and supplied the set-up instructions to ensure the process moved efficiently. However, Cincinnati faced an implementation challenge: Duke Energy required the addenda record to include the City’s Duke Energy customer number with the transaction to help identify it, but Cincinnati’s payments provider required a unique invoice number to be included with the customer number which was not acceptable to Duke Energy. There was also an additional Note field included with the addenda record that Duke needed to be removed. Cincinnati reached out to NACHA to better understand the notes field and what was standard under the NACHA Operating Rules. In conversations with NACHA, the City was able to confirm the NACHA Operating Rules provide for the use of business remittance information as a standard option. This determined that the Note field was to be removed from the addenda record if it was not populated. The City then presented that finding to the payments provider. The provider not only made the appropriate change to remove the blank Note field, but it went further to incorporate it into its baseline package — meaning the cost of the upgrade was covered under the City’s existing agreement. Powering Up Electronic Payments with the ACH Network A case study of the City of Cincinnati implementing payments plus information CASE STUDY
Transcript of Powering Up Electronic Payments with the ACH Network€¦ · Streamlining and updating this payment...
The ChallengeAt the beginning of 2014, the Public Utility Commission of Ohio began requiring Duke Energy to collect late fees on payments received 21 days after the utility bill was issued. This had previously been waived for municipalities. The City of Cincinnati’s payment procedure was unable to issue payment within the new timeline. A new process was required if the City was to comply with the deadline and avoid late fees. Coordinating faster payment of more than 580 energy bills for 14 different departments, offices, and programs across the city government proved to be a challenge. The City had to reimagine its entire approach to ensure the payments were made on time.
The OpportunityThe Office of Performance and Data Analytics convened an interdepartmental “Innovation Lab”, which utilized LEAN process improvement tools to identify the problem and outline a solution. The Innovation Lab process helped identify bottlenecks and delays and began to implement best management practices to reduce the approval and payment processes to ensure bills are paid on time. This process improvement exercise also identified the need to make the payment procedure digital, which will help prevent payment errors as well as save significant time and resources.
The ACH (Automated Clearing House) SolutionDuke Energy was on board to implement the new electronic payments strategy and supplied the set-up instructions to ensure the process moved efficiently. However, Cincinnati faced an implementation challenge: Duke Energy required the addenda record to include the City’s Duke Energy customer number with the transaction to help identify it, but Cincinnati’s payments provider required a unique invoice number to be included with the customer number which was not acceptable to Duke Energy. There was also an additional Note field included with the addenda record that Duke needed to be removed.
Cincinnati reached out to NACHA to better understand the notes field and what was standard under the NACHA Operating Rules. In conversations with NACHA, the City was able to confirm the NACHA Operating Rules provide for the use of business remittance information as a standard option. This determined that the Note field was to be removed from the addenda record if it was not populated. The City then presented that finding to the payments provider. The provider not only made the appropriate change to remove the blank Note field, but it went further to incorporate it into its baseline package — meaning the cost of the upgrade was covered under the City’s existing agreement.
Powering Up Electronic Payments with the ACH Network A case study of the City of Cincinnati implementing payments plus information
CASE STUDY
After gaining a better understanding by talking to the right people at NACHA, WPC-EDI, and X12, we were able to go to our provider using NACHA’s expertise and explain how they could enhance their service to make their records
comply with NACHA standards.
Businesses are invited to connect with NACHA directly and sign up to receive the ACH for Business email newsletter by visiting nacha.org/content/corporate-relations.
For more information on how to set up electronic payments, visit electronicpayments.org/business.
Use of ACH EDI among businesses is growing. Almost 2 billion addenda records containing invoice and other payment-related information were transferred over the Network in 2015 through CTX and CCD transactions, an increase of 9.1 percent over 2014.
The ResultsThe City has been up and running with electronic payments to Duke Energy since the spring of 2016, and they have seen significant changes in their payment processes, including increased efficiencies and time- and cost-savings. In March 2016, the City was still late on 66 accounts. By June, once the system was fully implemented, it was 7.
“Continuous improvement is the hallmark of transparent, responsible government. Streamlining and updating this payment process has resulted in significant fiscal and temporal savings, and is yet another example of the City’s commitment to increasing efficiency, eliminating waste, and continually improving the ways that we do business.”
— Leigh Tami, Chief Performance Officer
By implementing electronic CTX payments via the ACH Network, the City of Cincinnati:
• Reduced the payment window exponentially, moving from what took 20-30 days to receive the bill, process and approve, write a check and mail it to the vendor now takes 14.
• Nearly eliminated the potential for (and realization of) late fees. With payments now happening within the 21-day window, the City has nearly eliminated late fees.
• Improved both the city’s data accuracy and reduced Duke Bill processing time. With the CTX EDI framework in place, the city’s Duke account number will be transmitted to Duke automatically with the bill payment, speeding the bill processing time on Duke’s end and reducing situations where Duke had to manually review each check and determine which account to credit.
Key Tips for Businesses Moving to Electronic Payments1. Don’t assume your payment provider knows –
and is ready for – everything. Cincinnati recognized that our provider was incorrectly using the Note segment in the CTX format, and some of the requirements, such as the notes segment in the EDI 820, weren’t an option at the time. By working collaboratively with Duke Energy and NACHA, Cincinnati could develop a workable solution to provide the CTX data in a form that was acceptable to Duke Energy.
2. Create relationships with organizations who make electronic payments happen. Without guidance from experts at NACHA, WPC-EDI, and ASC-X12, it would have taken the team significantly longer to navigate a successful movement to electronic payments.
3. Engage different areas of your organization in the strategy and implementation of electronic payments. The City of Cincinnati brought together numerous departments to play a role in the decision-making and testing of this new solution to maximize results. By working together with the Office of Performance and Data Analytics, a holistic solution was developed that fixed both manual bill processing issues and electronic issues at a City-wide level.
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