Integrated Exception Tracking

The following article was originally posted on (Re-posted with permission.)

In an increasingly competitive banking environment, new efficiencies can pay big dividends. For commercial lending institutions, this is particularly true with regard to exception tracking.

And an “integrated” approach to exception management is top-of-mind with today’s banking leaders.

Before we explore the benefits of integrated exception management, it might be useful to discuss the symptoms of disintegration. Community banks often struggle with the following issues:

  • Expired, missing and past-due documents.
  • Unreliable customer and account information.
  • Labor-intensive follow up and indexing processes.
  • Lack of visibility and reporting.
  • Duplication of effort and systems.

As an example, imagine you work for an institution (we’ll call it “State Bank”) that relies on manual exception management. State Bank holds more than 500 commercial loans in its portfolio. Each loan has varying requirements, but most require updated documentation from customers, such as proof of insurance, corporate tax returns and other financials. How can you possibly track all of this across your entire portfolio?

Many institutions rely on some combination of manual ticklers, spreadsheets, databases and their core systems. In fact, our study of 96 community banks found that 69 percent of institutions are at least partially (or entirely) dependent upon these types of exception-tracking methods. While better than nothing, a disintegrated approach still exposes your institution to unnecessary risk.

Going back to our example, State Bank uses its core system’s built-in tickler for tracking tax returns and other financial statements. For insurance document tracking, the institution maintains a multi-tabbed spreadsheet. When management asks for a comprehensive report, the loan administrator spends several hours merging the data into a consumable format. In order to “clear” an exception, the loan administrator must file the paper document and then remember to mark it as received in the core (or spreadsheet).

In addition to visibility and efficiency concerns, State Bank is also prone to accountability oversights. Who is ultimately responsible for ensuring that the tickler system reminds the necessary parties on the correct dates? What happens if a reminder is overlooked? What happens if an exception is never cleared and the customer is continuously notified in error? These situations can often lead to finger pointing and sour feelings, which are especially counterproductive.

So what’s the solution? Some institutions are turning to a more integrated exception-management strategy. In short, this links together imaging, tracking and reporting within a single platform tied directly to your core system.

Let’s take a closer look at how this type of system can help.

Reducing Past-Due Documents, Errors and Oversights

Without a direct line of integration to your core system, reports become outdated the minute they are pulled. Outdated reports can cause your staff to make costly mistakes.

Compare this to a fully integrated solution, which connects exceptions, documents and customer information. Each night, your core synchronizes to your document management system. The two systems compare data and reconcile any differences while you’re sleeping. In the morning, your lenders, senior management and administrators automatically receive comprehensive reports in their inboxes.

Armed with this information, your team can get to work resolving actual exceptions (instead of generating and dealing with conflicting reports).

Avoiding Misallocation of FTEs

Banks struggling with manual exception tracking have no choice but to dedicate significant human capital to the process. In fact, many banks will hire one (if not more) full-time employee, whose entire job is to:

  • Update overlapping ticklers and spreadsheets.
  • Merge data from multiple sources into summary reports.
  • Remember to set new and clear existing exceptions.
  • Ensure external ticklers match the core system.
  • Generate and distribute notice letters to customers.

An integrated document- and exception-management system eliminates the need for most of this administrative work. Such human resources can be shifted to scanning and indexing documents as they arrive at the bank, which automatically clears outstanding exceptions.

Delivering a Better Customer Interaction

At the end of the day, your institution exists to serve its customers. Your customers are very busy people, and they don’t have time to be pestered with errant letters or phone calls. Unfortunately, if you rely on manual document tracking, customers will likely receive these types of solicitations from your bank.

Centralized document and exception management reduces customer friction by ensuring notifications are only distributed when warranted. Customers who send updated financials are automatically removed from further solicitation; whereas, those with missing documents will continue to track as an exception.

How to Achieve a More Integrated Institution

The decision to shift to a more integrated exception management process is one to take seriously. Improved accuracy, enhanced allocation of human capital and happier customers are just a few of the byproducts.

Of course, these efficiencies do not come without an investment. For example, the AccuAccount platform varies in cost based on your institution’s asset size and the features you need. In addition to the hard cost of the software, your institution should also evaluate existing hardware, infrastructure and in-house staff’s ability. All of these factors will be important in determining if an integrated solution is feasible at your institution.

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