Accounts Receivable Conversion - ARC

DEFINITION of 'Accounts Receivable Conversion - ARC'

A process that allows paper checks received in payment for an account receivable to be electronically scanned and converted into an electronic payment through the Automated Clearing House. ARC saves time and the expense of actually processing the check. Both the vendor and the bank on which the payment was drawn receive only an electronic image of the check.

BREAKING DOWN 'Accounts Receivable Conversion - ARC'

As the financial industry becomes increasingly computerized, ARC has become the norm rather than the exception for large payment processors. Prior to ARC and electronic payments, the most common method of payment was lockbox banking, in which payments are made to a post office box serviced by a bank.

ARC speeds the payment to the vendor, who otherwise would have to wait for an actualy check to be transported and processed.

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