Xerox 6180N Generic MICR Fundamentals Guide  - Page 19

Overview 7. Checks drawn on other banks are sent to the payor bank through a clearing (7) arrangement. The check may be cleared through the Federal Reserve, a correspondent bank, a clearing house, or directly by the issuing bank. The payor bank also balances the check against the deposit ticket (proof of deposit) (7a) to verify the check amount, and performs its capture pass (7b) on the reader sorter in order to identify the issuer account (7c). (Refer to the "Proofing checks" section of chapter 5 for more information on this part of the process.) 8. In most cases, the check is debited from the issuer account and moved to bulk filing (8), where it is stored until time for monthly statement rendering. From this point forward, an On-Us item is treated the same as one that was cleared to another bank. Two exceptions may occur: • If the payor bank does not honor the check, it is returned (9) through the BOFD to the payee. The amount is then deducted from the payee account. • During reconciliation, the account holder may discover a discrepancy (10) between its records and those of the bank. Their bank then researches any discrepancies. NOTE: Account holders may contract with their banks to perform reconciliation before clearing the check. Production cycle of a check The check production process starts as soon as the need is identified. Design requirements should comprehend purchasing, distribution, warehousing, manufacturing, internal and external processing requirements, and the needs of the check issuer. Banks frequently require new corporate accounts to submit checks for approval before the banks approve the account. The following steps, illustrated in figure 1-4, describe the typical process that is required before the first negotiable checks are delivered to the payee. Generic MICR Fundamentals Guide 1-9