Billing and payment options for local governments.

• Author: Hammond, Denise D.

Let government pay for it. How many times have citizens echoed that phrase? In reality, for government to pay for anything, it must first collect the revenue. Local governments provide many services--police protection, fire protection, emergency medical services, parks, recreation facilities, libraries, building inspections, utility systems, planning and community development, courts, and many more. To provide these services, governments levy taxes and collect user fees.

In today's financial environment, there are many ways to collect those funds. In the not-so-distant past, residents showed up at the town hall or city hall and paid in cash or check. Until recently, the only other option was to mail in a payment. Not so today. This article will look at both billing and payment options available to local government units and the advantages and disadvantages of each.

BILLING PROCEDURES

The goal of any government should be to optimize the collection of revenue in the most efficient manner and at the most reasonable cost. Before receivables like property taxes and utility charges can be collected, a government must generate bills and send them to property owners or users of services. Bills that are to be paid in person or mailed with a check to the government need only state the amount due and the payment due date. But more and more, local governments encode bills with a bar code or optical character recognition (OCR) scan line for electronic processing. These bills are often printed with a laser printer and include a coupon to return with payment. The pre-encoding of payment coupons saves time and eliminates keying errors during processing.

Outgoing envelopes can also be pre-encoded based on a nine-digit zip code to qualify for discounted postage on large mailings. The government may include a self-addressed return envelope that is bar-coded for faster processing by the post office and, ultimately, faster receipt and deposit by the government. While this may seem simple enough, the Postal Service has specific requirements for these "fast-forward envelopes," including envelope size and placement of windows. Information on mailing requirements may be found at www.USPS.com.

IN-HOUSE PROCESSING

Payments received for processing in-house may be mailed in, walked in, or left in a drop box located on government premises. The government may receive payments in the form of cash, check, or money order. When using a drop-box location, the government should make sure that access is secured, and depositors should be cautioned against depositing cash, as amounts deposited cannot be verified. Clerks processing the payments should be trained in recognizing counterfeit currency, and they should know how to accurately count large sums of cash. If staff is available, it is a good idea to have a second clerk count the money and verify large receipts.

A government should adopt a policy on the acceptance of third-party checks. If accepted, the third-party check should clearly indicate the account to which the payment should be applied. In the event the check is returned for any reason, the payment is reversed and the payer notified.

Regardless of how payments are collected, funds should be deposited in a timely manner. The sooner checks clear, the sooner the funds are available for...