Develop a current process model for the payment processing system

Please find the case study and refer to it. 1. Develop a current process model for the payment processing system of the project. 2. Changes in business processes and information you feel will improve the payment processing system of the project.In the first question we need to develop a current process model for the payment processing system. Can you please use DIA software. For the second one just a description or a diagram would be ideal. Make sure this is a Turnitin Upload. Thanks

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Case Study: Reliable Finance Company
Background of the Business
The Reliable Finance Company (RFC) started in a small town in the 1990s, lending money to farmers
and businessmen. RFC assumed risks that the commercial banks were unwilling to take and charge
slightly higher interest rates.
Now, RFC has 178 branches, from Sydney to Brisbane and from Melbourne to Adelaide. The
company is committed to making loans to individuals to assist them in making such purchases as
automobiles, appliances, and home improvements.
Bryce Clarkson, grandson of its founder, along with a new management team, manages the
company. They have decided on a growth plan that would expand the number of RFC branches to
400 within the next three years and to 1,000 branches within another five-year period after that.
These expansion plans will require an enhanced information system to support transaction
processing for loans, payments, and settlements. The President has asked the MIS Department to
develop recommendations for the re-design of the existing payment processing system.
Activities of the Current Payment Processing System
Once the loan is set up, customers can pay in three different ways. First, customers can bring their
payments into the branch in the form of cash, check, or money order. Second, they can mail their
payments to the branch. The branch personnel verify their Loan ID, if necessary by checking the
Customer card file, and update the loan Outstanding Loans File by pulling the voucher copy
corresponding to the payment and stamping it “paid” and then filling it in the Paid Vouchers file in
sequence by Loan ID and due date sequence.
The actual payments are then batched and deposited in the branch bank each afternoon. The Home
Office is notified by means of an Advice of Payment Received (APR), which is filled out for each
payment and mailed to the Home Office.
Third, customers may pay the Home Office directly. If they do so, the Home Office Payment
Processing Department verifies that each pay is complete, by checking the enclosed voucher. If the
voucher is missing, the payment processing clerk uses a printout of the central Outstanding Loans
File to look up the Loan ID corresponding with the correct account. Then the branch personnel are
notified of the payment by means of an APR, which is then mailed to the branch personnel.
The details of the payment are used to update the Outstanding Loans File in the Home Office. Each
evening, a batch payment processing run is used to update all the accounts centrally, based upon
payments received during that working day. In addition, the branch personnel use the APRs from the
Home Office as well as its own internal records of payments that have been sent directly to the
branch personnel to update its own local Outstanding Loans File.
Payments made directly to the Home Office are batched and sent directly to the Home Office bank.
The payment processing system produced a payment report for the Accounting Department and a
branch-by-branch payment report for each Branch Manager.
Delinquency Analysis System
On a weekly basis, the delinquency analysis system is run. It checks the Outstanding Loans File in the
Home Office and determines if payment are overdue. It generates an Aged Trial Balances Report,
which indicates which payments are 15, 30, 45, and 60 days overdue. When a payment is 15 days
overdue, a polite First Reminder is sent. When a payment is more than 30 days overdue, a second
(less polite) reminder is sent. Four reminders, with increasing degrees of insistences, are sent. All of
theses reminders are computer-generated. After the loan becomes 60 days overdue, it is moved to
the Collections Department, and collections agent follow up at that time.
Settlement Accounting System
From time to time, customers want to finish paying a loan before it becomes due. In these cases, the
customer requests a settlement figure, which is the amount required to settle the outstanding
balance on the loan. If the request is urgent, the Branch Manager will phone the request to the
Home Office. The information system department now prepares a settlement run, which is
processed nightly, with the urgent request for the settlement balance. The settlement balance is
sent back to the Branch Manager the next morning.
Problems with Payment Processing
At the current time, RFC is planning to expand the number of branches from 187 to 400 in the next
three years and to a target of 1,000 over the next five year after that. To accommodate expansion
plans, the current system will need to be streamlined, modified, and enhanced. Some of its current
problems are the following:
1. About 80% of the payments are made to branch personnel, and the rest are mailed to the
Home Office. Of the payments that are mailed, the payment voucher from the Voucher
Booklet is missing in about half the cases. This does not matter so much at the branch
location because the branch personnel maintain a local customer card file with the name
and Loan ID. However, at the Home Office, it is more difficult to trance payments. At the
current time, incoming payments without an accompanying vouchers are identified by
checking against a printout of the Outstanding Loans File. However, unidentified payments
sometimes generate an APR to the wrong branch, and the entire process causes more
clerical work and error correction.
2. The bottlenecks in processing payments trigger additional problems. Considerable clerical
overhead is caused by situations where people do not pay until ten days after their due date,
and because of various delays, their payment does not actually get posted to the
Outstanding Loans File until after the Delinquency Analysis run has sent them their first
reminder. When they call the branch personnel to protest receiving a reminder, the
personnel have to call the Home Office and trace their payment. Forty-four people are
currently tied up in the Customer Service section at the Home Office, and Much of their time
is spent dealing with late and missing payment matters.
3. Throughout the system, excessive clerical overhead occurs. In 129 of the 187 branches, a
full-time clerical person was engaged in maintaining the local branch loans file, in pulling
voucher copies, in recording payments, and in making out APRs. In the other 58 branches,
these activities take between 2-5 hours per day.
4. Since the Outstanding Loans File is always several days out of date, it is often difficult to
isolate loans that are delinquent until it is too late. About 2.5% of all loans are never repaid.
Last year $4,795,000 was written off as uncollectible. Although processing delays account for
not flagging payers sooner, management feels that RFC could do a much better job of
weeding out potential delinquents during the initial approval process. To do this, RFC wants
to build a picture of the potential delinquent, including age, occupation, income, family size,
location, mobility, and a host of other criteria. A delinquency profile will aid in identifying
“high potential for delinquency” accounts. This profile can be developed, maintained, and
modified by Operations Research personnel on an ongoing basis.
5. Because of error and adjustment activities, it is rarely possible to balance the books for
month end before the 12th of the succeeding month. This greatly complicates planning for
cash flow and frequently requires RFC to borrow more money that it needs and at higher
interest changes.
Source: Modified based on the material from Summer, M. 2005, Enterprise Resource Planning,

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