Positive Pay Yields Positive Results At Stimson Lumber

Many people shudder at the mention of the law of unintended consequences, but unforeseen results aren’t always negative. Ask Greg Baumgardner, IT manager at Stimson Lumber Company. When Baumgardner’s CFO asked him and his staff of four to research positive-pay solutions, the objective was simply to beef up security of the company’s payment operations by introducing a check fraud intervention process. But Baumgardner’s search set off a far broader corporate initiative that completely transformed the company’s back-office operations.

Stimson Lumber is a leading forestry and wood products company with roots tracing back to the mid-1800s. The company owns some 450,000 acres of timber in the Pacific Northwest and operates 14 manufacturing facilities in four states. The facilities communicate via a WAN network with some 56K circuits and Internet VPN connections for certain locations. They run their operations on an IBM iSeries 7406 computer, using SupportNet‘s N/Compass management software. The solution’s accounts payable module processes more than 19,000 accounts payable checks annually, through three separate Bank of America accounts, which vary widely in terms of volume.

Stimson Lumber had been using conventional practices to pay its bills. Payment data was processed and formatted on N/Compass and was spooled out for production on preprinted tractor-feed forms, running on heavy-duty impact printers. Preprinted check forms are considered one of the primary points of vulnerability in check fraud activity, since they are extremely susceptible to theft and alteration. Positive pay is one of the measures identified by the Uniform Code Council, through which corporations can avoid or reduce their liability if a fraud attempt is successful.

Baumgardner researched several potential solutions, among them Check Fraud Alert, an option available with the EZPayManager/400 payment management solution, developed and marketed by the iSeries Division of ACOM Solutions. In EZPayManager/400, Baumgardner discovered a solution that could further secure the company’s payment system. EZPayManager is a universal payment platform that enables companies to replace preprinted check forms with electronic check templates that are stored securely on an iSeries and can generate both printed checks and electronic payments in the same payment run.

When a check run (or a manual check) is needed, data is spooled out first to EZPayManager, where it merges with the respective template or ACH format, and then is spooled further to a MICR laser printer or to the banking industry’s ACH network. The printer produces the checks, complete with all signatures, company information, graphics, and signatures, in a single pass. Checks for under $20,000 are signed automatically; those over $20,000 require two manual signatures and are diverted to a separate printer tray during the check run.

The Check Fraud Alert positive pay file is generated as part of the same check run and is forwarded electronically to the bank, where it is used for automatic comparisons as checks arrive for clearing. The payment run can also generate remittance advice as a printed copy or for electronic delivery, as well as the once-a-year production of IRS 1099 forms.

While exploring the EZPayManager/400 solution, Baumgardner also became aware of two other potentially promising ACOM offerings: EZeDocs/400, a document output management solution, and EZConnect EDI-XML, a PC-based electronic document interchange (EDI) solution that integrates with iSeries servers and enables untended document exchange between trading partners.

IN FOR A DIME, IN FOR A DOLLAR

Led by Baumgardner, Stimson Lumber purchased the EZPayManager/400 checks solution with Check Fraud Alert, three desktop magnetic ink character recognition (MICR) laser printers, as well as design services for the three AP checking accounts–two of which are assigned by geographical area and the other to freight transportation. “As long as we had to pay for the software to get Check Fraud Alert, it made sense to go with laser checks as well,” Baumgardner says.

In both EZeDoc/400 and EZConnect, Baumgardner recognized an opportunity to change the way that Stimson’s back office did business. As with the payment processes, all of the company’s back office documents were produced on preprinted, multi-part tractor-feed forms, which had to be burst and decollated manually after printing. This was labor-intensive and required maintaining a large inventory of paper that periodically required reprinting, as well as a fleet of printers ranging from heavy-duty Printronix models to small desktop dot-matrix machines.

Converting to electronic documents obviously would result in significant savings in direct costs for printing, equipment, and maintenance. Baumgardner also anticipated major improvements in workflow, simply through the ability to produce documents on plain paper, using on-site laser printers.

Again, ACOM was called upon to implement the business documents, including pick lists, bills of lading, customer acknowledgements, invoices, and truck dispatch forms. Baumgardner provided copies of the forms, and ACOM’s professional services staff replicated them as electronic templates, then forwarded them to the company for uploading to its iSeries.

Meanwhile, the accounts receivable department came forward with another challenge. Some very large customers with huge volumes of paper documents were losing track of invoices being mailed or faxed–often multiple times. Baumgardner purchased the EZConnect solution and requested that ACOM implement EDI transaction sets representing forms directed to EDI-equipped customers. These documents are now transferred electronically, virtually eliminating any chance of loss and dramatically improving days sales outstanding with large-order customers, as well as expediting the flow of information between trading partners.

“EDI saved the accounting folks a lot of headaches relating to paper invoices,” Baumgardner says. “Very little resending is now necessary, and 98 percent of the invoices are paid without retransmittal.”

Most recently, Stimson Lumber has incorporated ACOM’s automated fax and automated e-mail modules into the solution. The automated electronic solutions allow for distribution of documents (such as invoices, acknowledgments, and truck dispatch forms) by fax or e-mail, directly from the iSeries platform. Previously, these documents could be faxed from the platform, but since it was not optimized for the purpose, the process was somewhat clumsy, with part of it performed on the iSeries and part on an associated Windows platform. The capability to send these documents by e-mail straight from the iSeries is all new.

The optimized back office operations have benefited not only the accounting staffs but also the IT staff. “We serve as the bridge between the departments and ACOM, but aside from checking something occasionally, we have very little to do with the line operations,” Baumgardner says. “The IT department doesn’t have to touch anything, other than to make form changes, add users, and similar administrative work.”

Baumgardner uses the EZDesigner/400, a 32-bit bidirectional design tool that ACOM introduced in mid-2003, to update forms or make other changes. It lets IT staff download form and check templates from the iSeries to a PC; they then make modifications and upload the revised templates to the iSeries. It’s a process that Baumgardner says “is actually a lot of fun.”

Overall, Baumgardner says he is happy with the new electronic processes ACOM helped put in place. “It’s eliminated a lot of hassles, and it’s cleaned up a lot of disconnects in our accounting processes,” he says. “Things happen faster and more efficiently, and ACOM’s support has been great.”

Victor Wortman is a freelance writer specializing in information technology subjects. He is based in Santa Monica, California. E-mail: vwortman@earthlink.net