Is this what's going on in your AP Department? OMG. It's time to move into the current century! EDI has a way to reduce or eliminate this process so let's take a look at each step I've indicated above -

• Printing of paper checks - if you're familiar with EDI and the movement of funds electronically, you're probably aware of the varying ways that payments/funds can be done electronically. Below are a summary of the ways this is done -
  • The movement of funds can be done via Wire transfer and remittance details mailed - Funds movement is electronic but the remittance is still printed and mailed
  •  The movement of funds can be done via ACH and remittance details mailed - Funds movement is electronic but the remittance is still printed and mailed
  • The movement of funds can be done via Wire transfer and remittance Details can be done via 820 transaction - both Funds movement and the remittance are electronic
  • The movement of funds can be done via ACH and remittance Details can be done via 820 transaction - both Funds movement and the remittance are electronic
  • The movement of funds can be done via ACH with 820 transaction data - both Funds movement and the remittance are electronic
  • Retailer initiates the Corporate Trade Exchange (CTX) format file with their bank which must be used and include the EDI 820 transaction set. The data is moved to the supplier's bank in the same fashion, and the 820 data is passed on to the supplier - both Funds movement and the remittance are electronic
•   Printing of check Remittance - In EDI this is an 820 - Payment Order/Remittance Advice
  • As indicated above this transaction can be included within a file delivered to your bank, but is typically done directly with your trading partners.
  • While this EDI transaction allows much flexibility, (the structure can vary) my recommendation is to not make your data feed overly complex. I've seen many buying organizations provide data for the invoices being paid that include which PO is being represented all the way down to communicating each item within the invoice. Remember your audience is an Accounts Receivable system and that system really only cares about the Check Number, Check Date, the invoice number, Invoice date, the Gross, Discount and Net amounts for each invoice. I'd recommend starting out with mirroring what is displayed on the paper remittance. Thenm as you get requests from your trading partners for more details, evolve your electronic remittance program accordingly.
• Creation of Deductions/debit memos - In EDI this is an 812 - Credit/Debit Adjustment. This transaction accomplishes two things, it can be a method of your partners sending (instead of mailing) credit memos and can be a method of communicating deductions being made against an invoice or for other negotiated allowances.
  • Credit memo - Where the concept of electronic credits seems interesting, in reality we all know that many suppliers may apply a credit to their customers' account, however it doesn't happen so often that the credits are actually mailed or transmitted. This is primarily due to their customers paying the invoices short or creating a deduction against the next check issued, referencing the invoice in question so to avoid their customer deducting and taking the credit memo. Besides, the suppliers wait for that deduction/debit and then reconcile the account with the credits applied.
  • Debit memo - As mentioned in the above bullet point, buying organizations withhold payments for invoice discrepancies one of two ways. Either paying the invoice short and mailing, or including a reason for the short pay to the supplier, or they pay the invoice in full but then generate a deduction (debit) referencing the invoice in question. The electronic communication we're talking about here is paying in full so the remittance advice would state that. and then the debit becomes its own line on the remittance. This make it easier for the suppliers AR department to reconcile to a credit memo that they may have applied but not mailed or sent.
• Additional ROI - so what is the real value to handle finance transactions electronically?
  • Resource usage - As you can see, each of the steps above reduces the resources and time needed to stuff those checks or apply the payments. For the buying organization's AP department, each part of the matching process eliminated means less time spent on the check mailing process. For the Suppliers, the AR dept has the remittance details loaded to the Accounts Receivable system, and this has value especially around invoices that are being paid without issue so the concentration can be on those that are not paid in full.
  • Postage- this one is an obvious value as if you're not actually mailing checks and backup then the cost of mailing is eliminated for the issuer.

• Remittance Advice - start out by sending the remittance details electronically. This will remove the need to stuff the paper remittance stack of papers every Friday morning and gives value to your partners from the start
• Elimination of printed checks - This process can occur throughout time, one supplier at a time, as this is done through the banking process. In theory, this piece could be done without the remittance details sent electronically however the value proposition is only with the Retailer (maybe supplier if the payments occur quicker) but we want all parties to be able to benefit.
• Communication of Deductions/Debit memos - this one tends to be the last part implemented, not sure why. Perhaps it's because there should be fewer issues if an electronic supply chain is working correctly (electronic PO's, Acknowledgments, Ship Notices and invoicing) thus there should be fewer order/shipment/invoice discrepancies.