Articles

MICR Checkprinting Arrives for Managers

Permission granted by the Institute of Real Estate Management for reproduction from the January/February 1992 issue of the Journal of Property Management, 430 N. Michigan Ave., Chicago, Illinois 60611. (312) 329-6000. http://www.irem.org. For personal use only. All rights reserved.

You may say "Myker" and I may say "Micker", but however it is pronounced, desktop MICR (magnetic ink character recognition) checkprinting has finally become a viable alternative for the property manager. The possibility of cost-effectively creating MICR-encoded checks on blank check stock offers the end of storerooms overflowing with check stocks and hours spent voiding checking "mistakes" destroyed by the impact printer.

In its place, desktop MICR printing enables the manager to use an existing HP LaserJet III or other MICR-compatible printer to run checks for multiple properties---including logos and signatures---with just the touch of a button. Welcome to the future!

First some background

The term "MICR" refers to the line of numbers and special characters that appear at the bottom of every check. Since the 1940s, banks have speeded check processing with special devices that "read" the MICR encoding and translate the characters into the account number and other pertinent information.

Until a few years ago, almost all checks were printed by specialized form printers. Then a few pioneers began offering dedicated printers capable of printing MICR-encoded checks. However, the high price tags of $15,000 to $20,000 made these printers applicable only to companies writing larger volumes of checks on a larger number of bank accounts.

It was only two or three years ago that manufacturers were able to develop toner cartridges that work with the Canon SX engine. This engine drives about 75 percent of the laser printers on the market today, some of which are priced well under $1,000. The age of distributed checkprinting had begun.

Equipment requirements

To print desktop checks, users need only a limited amount of specialized equipment. The main elements are a PC or compatible, checkwriting software, a laser printer with MICR toner, a MICR font especially designed for the printer and toner, and blank check stock.

Checkwriting software, most of which is designed for IBM-or-compatible equipment, incorporates a database to order information to appear on the check and graphics elements to emulate, or draw, the check onto the stock. Many software programs also accept optional files supplied by a publisher or an outside service bureau that permit company logos and signatures to be printed directly onto checks. For security reasons, these capabilities are usually stored on a separate cartridge, which can be removed when checks are not being printed.

Initially most checkwriting software was developed as stand-alone products, requiring users to download check information from accounting software or to re-key it directly from hard copy. Today, many checkwriting software publishers are working with property management software publishers to create interfaces with widely used accounting programs. Among programs that currently offer interfaces are AMSI, Great Plains, and Platinum.

Other publishers, such as the Softa Group, Minicom, and MRI, have created proprietary checkwriting software linked directly to their own property management programs. These integrated programs enable users to follow exactly the same procedures as before when writing checks, eliminating the need to learn new commands.

Directly connected programs also eliminate the risk of corrupting data when it is transported from one program to another, according to Don Dzurskinski, vice president of product management at the Softa Group. Nor is security compromised with direct-connect programs, notes Les Cseh, managing director of CHEQsys in Markham, Ontario.

The other major component of in-house checkwriting is a laser printer capable of printing MICR. Here again there are two options---the specialized and the general.

Probably the most cost-effective option for desktop checkprinting is the Hewlett-Packard LaserJet II and III, which, along with other lower priced printers using the Canon or Ricoh engine, can be equipped to print MICR checks. The same printer may also be used to print other documents when checks are not required.

The biggest consideration in using an HP is one of quality. It isn't that the printing is poor; it is just that the HP was not designed to print checks. "These printers were produced at an accuracy level required for word processing or graphics," explains Jim Loomis, vice president of Bottomline Technologies, a firm supplying turnkey checkwriting solutions in Exeter, New Hampshire. "MICR printing was not one of the applications recognized in the past, so alignments were not as critical."

Because of this limitation, continues Loomis, it is critical to have software that allows for alignment adjustments if a LaserJet is used to print checks.

The other printer alternative is a machine specifically designed to print checks, such as the new Xerox 4197 Desktop MICR Laser Printer. Specially designed printers offer greater accuracy and more security features, but costs are higher. However, for the user printing more that 2,500 checks a month, the added cost may be justified.

The third component of desktop MICR is the blank check stock used to print desktop checks. Like preprinted check stock, these "blank" forms may be ordered from standard forms suppliers in bulk. However, unlike impact printed checks, the quality and porousness of the paper may have a direct impact on the rejection or acceptance of desktop checks.

Because the magnetic toner must be absorbed by the paper and not smear off, paper and toner must be compatible. Most checkwriting software vendors provide lists of designated suppliers, and it is wise to rely on these sources.

Paper conversion, the placement and type of the perforations, the edges, and any preprinted information also are critical to successful MICR, says Jim Loomis. "Because the placement of the MICR line must be precise, cutting the roll of paper an eighth of an inch too short can misalign the image and cause a reject," explains Loomis.

MICR applications to property management

Yet, once the components are in place, desktop check printing is well suited to the demands of real estate management operations. "Property management, along with a handful of other niche industries, is absolutely suited to this type of product," says Jim Loomis. "The biggest savings in desktop MICR printing come when checks are written on multiple accounts, rather than just in volume. The more accounts; the bigger the savings."

Because desktop MICR printing has the capacity to imprint all information on the check, including logos, names and addresses, and bank names, one blank check stock can be used for all accounts. As a result, an entire check run for all properties can be done without the need for staff to load, register, reload, and register different stocks.

A 1986 study by Deloitte, Haskins and Sells (now Deloitte and Touche) found that the average cost of issuing a payroll check was $1.12. Yet Jim Loomis estimates the cost of the average desktop check at approximately $0.10. Savings in staff time are a big component of that reduction.

"Although I haven't done a time study, my staff estimates that they save between 25 and 35 percent of the time it used to take them to write checks each month," reports Richard Miller, president of Transtar Property Management, with offices in Los Angeles and Orange County, California. The company has been printing its own checks for approximately 10 months, using checkwriting software from the Softa Group.

Miller uses one HP LaserJet III to write checks for his entire 1.6-million-square-foot commercial portfolio. Explains Miller: "The two other offices transmit their receivables to the main office by modem. We then print a precheck selection report for the managers to sign off. Once that's done, we print all the checks together. It gives us terrific quality control."

Miller also values the ability to use a laser printer instead of a dot-matrix one, eliminating the need to void checks "eaten" by the printer during alignments. "In the long run, this may be the biggest single savings," says Miller. "Our controller sometimes spent hours trying to find a missing check that was not entered as a void or hand-written checks not entered into the computer."

David Tomberlin, controller of Atlanta's Property Concepts, finds the ability to quickly write one or two checks using his MRI checkwriting software has reduced the time and expense of handwritten checks. "Before MICR, we used to handwrite checks if we needed only one or two," explains Tomberlin. "Now, we keep the safety check stock always loaded in a separate tray, so running even one check is easy. And we get the benefits of recording the check, closing the invoice, and all other accounting functions in one procedure."

Savings are also realized by eliminating the space and money tied up in multiple preprinted checks. "Our storeroom used to look like a swap meet," recalls Miller.

Les Cseh estimates that the cost of laser check stock is 65 percent less than the price of multi-part impact forms. And because check stock is blank, changes in addresses, company names, and bank accounts may be accommodated with ease.

Richard Miller recalls one new institutional client who asked how long it would take the company to be ready to write checks on a new property. "I told him we could do it that afternoon," recall Miller. "I got the account number from the bank in the morning, designed the form using standard formats in our software, took a copy to the bank for an okay, and was ready to go.

"The pension fund client was really impressed," says Miller. "And the quality looked like we had been managing the property for 10 years."

David Tomberllin values the added security provided by the blank safety check stock. Before switching to MICR printing two years ago, the company, which manages 500,000 square feet of commercial property in Atlanta, had some preprinted check stock stolen by an employee.

"Fortunately, we discovered the theft before a check was written," recalls Tomberlin, "but you can't count stored checks every day. With the blank stock, we are not at risk."

A word of caution

If all of this seems too good to be true, it probably is. Banks are already expressing concerns about the lack of quality control standards and potentially high rejection rates from desktop MICR operations. Current bank reject rates are approximately 1.5 percent, but banks fear that with widespread use of desktop MICR, reject rates could climb significantly. Even with good products, a lack of understanding and education among both suppliers and users makes the possibility of errors much higher.

The American Bankers Association (ABA) already has standards for the printing of MICR lines by commercial printers. Currently, its ANSI X9B Financial Services Committee is working to create MICR print quality standards for desktop systems. According to committee chairman Roy Vandenberg, these standards will be made available to vendors by mid-1992.

To be read by high-speed bank sorters, the MICR-encoded line of 14 characters must be placed within certain specific parameters on the check. The ABA requires that characters be exactly one-eighth of an inch apart. Thus, software must be flexible enough to allow for exact measurements of dot placements.

Placement of the MICR line on the check is also critical. Most banks and some software publishers will provide templates to indicate the exact position of the line and the amount of space that must surround it.

Many factors can inadvertently alter the exact line placement, including differences in paper size and variances among printers. Les Cseh explains: "The difficulty is that many of these laser printers were not designed with the requirements of MICR printing in mind. In word processing, an eighth of an inch variance doesn't matter, but in MICR it can cause a reject."

To ensure that the line is placed correctly, it is vital that initial checks be tested by a bank and by your MICR software supplier. ANSI standards for commercial checkprinting require that every 500 checks be tested. Visual testing should be performed regularly using a template. Says Les Cseh: "Visual checking will detect approximately 90 percent of check errors which result from either misalignment or human error."

Check rejection may also result from toner problems, such as insufficient magnetic toner on the check surface. Failures may result from damaged or insufficient toner in the cartridge or from an incompatibility in absorbency between toner and paper. For instance, CHEQsys has "tuned" their MICR fonts to two toner formulations. Substituting a different brand might easily produce less than acceptable results.

Toner inconsistencies are much more difficult to detect and are often not apparent to a naked eye. Testers are available, but the $3,000 price makes them too expensive for smaller users.

Another alternative is to use a third-party firm to periodically test checks. One firm, Clearwave Electronics of Niagara Falls, New York, offers smaller users the option of testing up to 10 voided checks a month for less than $100. MICR software vendor CHEQsys offers the testing of five checks every week as part of its software maintenance contract.

For the small user, monthly testing may be more than sufficient, once the system is in operation. "The consistency of printing at the desk-top level is surprisingly good," says Jim Loomis. "Because the desktop printer is running at about eight pages a minute, it does not reach as high a temperature as faster printers. Consequently, there is very little deterioration over the life cycle of between 300,000 and 1 million sheets."

Using a reputable vendor---one recommended by the checkwriting software provider---also eliminates the possibilities of rejects. But nothing is foolproof. Remarks Jim Loomis, "We control all the system materials that we ship out. However, if the customer sources out part of the system to a less reliable vendor, quality may deteriorate."

A risk worth taking

Yet, despite the need for care, desktop MICR checkwriting offers a tremendous potential savings to the property manager. "My initial reaction was skepticism," recalls Richard Miller. "I couldn't afford to have a whole rash of checks come back from the bank."

However, after running the checkwriting software from Softa for ten months, Miller is a convert. "I don't want to sound like a poster for MICR, but I really anticipated more problems than we have had," says Miller. "So far, we have had no bank rejects. And the staff thinks it's great. I'd have a mutiny on my hands now if I tried to change back."

Howard Franklin is a freelance writer. He is based in Chicago and specializes in stories about the real estate and banking applications of computer technology.

Home   Sources   Articles   Resources   FAQ

Click here to submit to the MICR Repository.

The MICR Repository is sponsored by
ASAP Checks, Forms & Supplies  http://asapchecks.com
October 28, 2003