Back in 2006, we, then VCF, had gathered a group of retail A/P executives together to determine how to best improve the payment process. It was thought that taking the VICS 426 Adjustment Reason Codes and simplifying them would reduce the number of codes to a more manageable list. That's when we heard from the larger retailers that there was nothing wrong with the process and to "be reasonable and do it our way!" In fact, many of the participating retailers said that suppliers wanted as much detail as possible regarding why a deduction was being taken. When talking with suppliers, you really hear two different stories – one school wants a lot of detail while the other says the "ballpark" works.
So, in 2012 when the Federal Reserve Bank of Minneapolis created The Remittance Coalition, RVCF determined we had to join and participate. The Fed's desire is to modernize the B2B payment process. Unlike the consumer sector, B2B payments, for the most part, are still handled by checks. Payors believe that mail time and check/deposit cycles, buy them time or most call "the float." I remember opening a cash management account in 1982; the checks sent to me were drawn on a Cincinnati, OH bank and I lived in New York. My account representative said this would buy me two to three extra days of "float" plus mail time – but folks, that was 1982. Hello! The world has changed, yet businesses are still writing checks. The Remittance Coalition is a making a great effort to get businesses, especially small businesses, to start making payments electronically. The first step for the Fed was to understand how businesses conducted themselves and they immediately determined that not all supplier/creditors' invoices were paid in full and that, for various reasons and in many instances, deductions were taken. With this in mind, the need for a coding system was evident. Since RVCF has experience in working with retailers A/P executives and through the many discussions that took place between 2006 and 2007, we rose to the occasion. Because a list of transaction codes for electronic payments existed, the Coalition simply had to reduce that number of 700+ to a more manageable number for small businesses to utilize; that number has initially been reduced to just less than 80.
Now, for the tough part – getting adoption! Over the last few years, RVCF has invited representatives from the Federal Reserve Bank of Minneapolis to come and speak at our Annual Fall Conferences in an effort to update the attendees on the status of the Coalition's accomplishments. RVCF has reached out to our retail members' A/P executives and asked them to participate in a retail A/P roundtable, taking place Wednesday morning at the Conference, to obtain feedback on retail member interest, feasibility of adoption, and next steps.
Also, to be discussed at the A/P roundtable and under the auspices of Accredited Standards Committee X9C, The Remittance Coalition is forming a work group of business practitioners who are going to create a new standard/technical report that suggests best practices for the handling of debit balances in the retail industry. This idea was a direct result of the focus group established at the RVCF Fall conference in 2013. Now, we need input from our retail members to determine feasibility and next steps in this area of the reconciliation process.
RVCF has long been an advocate of streamlining and simplifying the payment process. Unfortunately, most payors are not going to invest in this area as they do not believe it is broken nor do companies want to spend precious resources in an area that has no ROI. But, in any event, we have to start somewhere and, push ahead, we will!
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