Q&A: Can My Bank Produce an EDI 822 File?

When I thought to write Q&A posts I assumed I'd run out of questions to answer but, from outside the field, very few Bankers or Treasurers understand Account Analysis so it has given me more to write about and - hopefully - this space remains informative.

Can my bank produce an EDI 822 file?

The first thing I ask when I get this question is, "who is your bank?"  It is safe to assume that the big banks of the USA are all producing an EDI 822 file for their Account Analysis customers.   There are some smaller, when compared to the Big Four, banks who have yet to move to an electronic file format for their Account Analysis.  Then there are some banks who would prefer their customers never find out an EDI 822 file exists!  Some banks will attempt to charge the customer requesting an EDI 822 an exorbitant initial set-up cost and/or try to appease by sending a MS Excel spreadsheet in place of or in addition to the paper Account Analysis statement. Usually, neither are good options which I will explain below.

Should my Treasury dept request an EDI 822 file?

The answer to this question depends greatly on what you plan to do with the EDI 822 file.  If you have already purchased and implemented an Account Analysis system, then an EDI 822 file is a must have.  It makes the capture, translation, and analysis of your EDI 822 file and even your BSB files easier and thorough.  However, if your Treasury staff does not have a software program which can capture and analyse the 822 data then how much benefit will an 822 file offer?

The comment I hear frequently from Treasury staff regarding an EDI 822 file is, "I can't read this thing!"  If you can't decipher what the file says and you do not have an Account Analysis system or module as part of your Treasury Workstation, then continuing to receive either a .pdf or Excel spreadsheet from your bank is a low cost alternative.  Always weighing the cost-benefit of any financial decision is a smart thing to do.

When would you recommend receiving an EDI 822?

Since the goal of Treasury is to cut costs and use money efficiently, my first response is when it helps your company achieve those goals.  Some Treasury departments are not fully staffed.  Even then, some are not staffed with an expert analysis team.  I have seen some pretty elaborate spreadsheets and macros used in MS Excel to calculate bank pricing, charges, volumes, fluctuations of either, and historical trends.  Since adding a new row for a bank service and/or account signifies an addition, the staff is aware of new services and accounts as well.

When the expert Treasury staff is not available, when the resources are just not there, and/or making the time to thoroughly analyse your bank fees is the last thing you attempt to do before the invoice must be paid; this is when I'd recommend an EDI 822 file.  Coupled with an Account Analysis system, it offers an efficient use of time which allows less focus on manually keying in data into a spreadsheet but more focus on analyzing that data.  Better management of your bank fees and cutting costs so your Treasury department's annual budget actually decreases with each passing year, should be the ultimate goal of any Treasury department.  How you get there depends on the individual needs of each company.

What about the BSB file?

The same would apply to the BSB file as well.  If your company has only domestic bank accounts denominated in the local USD currency, then a BSB is unnecessary.

With currency conversions, conversion rates, possible taxes, etc the BSB is slightly easier to read in its .xml format.  However, not all Account Analysis systems or Account Analysis modules of Treasury Workstations are TWIST BSB or ISO BSB/camt.086 message compatible so make sure you ask the right questions if you are deciding this is the right path for your company.

As always, if you have an Account Analysis question please feel free to email me: GirlMeetsAA@gmail.com. 

Happy Analyzing!

BSB Currency Types

The Bank Services Billing (BSB) is the international Account Analysis file which allows for various currencies.  Most companies have been receiving the BSB for some time now but do we really understand what each currency type tells us?

Below are 4 currency types you will see in a BSB file (their actual tag names may differ) along with some example balances.

• Account Currency - the currency in which the final account balances are denominated.
• Ledger Balance
• Float Balance
• Net Collected Balance
• Balance Subject to Reserves
• Investable Balance
• Etc.

• Price Currency - the currency in which the account's services are priced.  
• Settlement Currency - the currency in which the account's final bank fees are denominated and due. 
• Services Charges - Balance Compensable
• Service Charges - Balance Non Compensable
• Service Charges Net Due This Statement
• Total Service Charges Invoiced 
• Etc.
• Host Currency - the currency in which the account's taxes are due.

Most are already familiar with the account currency which usually ties to the home country's currency in which the account resides.  All the above currency types are important but since most Treasurers are more interested in what they owe, this makes the Settlement Currency very important.  Without it, it may be difficult to determine in which currency your final fees are due and how much is due.  

Important to Note:

• All 4 currencies may not be denominated in the same currency. Usually, there are 1-2 currencies per account statement but this may not always be the case.  
• The Account Analysis file must include a conversion rate.  This conversion rate is sent by the bank letting you, the Treasury staff, know what rate was used to convert one currency into its final settlement currency.  
• There is a Settlement Currency for both the Compensation Balances and each individual Service Charge.  You may see a Settlement Charge for your services in one currency which should align with the Settlement Currency of your total service charges due.  
• For individual bank services, Price Currency and Settlement Currency are different.  The currency in which your bank services are priced may be different from the charge in which your bank service fees are due.  
• Although Host Currency does exist I haven't seen many banks send tax information on their files.

FAQs:

1. Now that my bank sends a BSB, how do I make sense of its data?  
• Capturing and processing the data using some form of an Account Analysis system is the best approach.  It will allow you to easily read the BSB data, see your account balances, check service activity, and a host of other things. 
2. Most of our accounts settle in various currencies, how do I convert them into a single currency for reporting?  
• The bank should always send a conversion rate when the Settlement Currency differs from the Price and/or Account Currency.  This allows you to audit your bank fees due.  Your Account Analysis system or manual calculations using an applicable conversion rate according to an as of date will allow you to convert your multiple currencies into one for reporting.  
3. We receive the TWIST BSB; will the data differ when we begin receiving the ISO BSB?
• No. The tag names or formatting of the file may differ but your Account Analysis system should already be ISO BSB or camt.086 message ready.  The same data points will be sent so there are no major differences or changes your Treasury Dept should make to their process(es).  

This subject matter may not concern many companies whose accounts are all domestic but for the others, there were enough questions to make the post worthwhile.

Happy Analyzing!  

Keyword Search: EDI 822 Sample File

Regularly, I like to check which keywords brought someone to my blog or to a specific post.  From these keyword searches I can get an idea of which questions people desire answers to.  The #1 keyword search (thus far) has been "822 file".

These are variations of this internet keyword search that I've seen:

• EDI 822 Account Analysis
• 822 Statement
• X12 822
• 822 File
• What is An 822
• Account Analysis Statement
• 822 Sample File

I guess it's no surprise that of my 12 blog posts (thus far) the one with the most hits has been ANSI X12 EDI 822 with a 265 view count.  Considering that was my 1st blog post almost 9 months ago I think I should probably focus more on this topic since there may be a demand for the knowledge.

The Bad

Unfortunately, there isn't much I can discuss or explain without giving away most of the formatting rules and correct ways to construct an EDI 822 file.  Of course there are many basics on the internet but the heart of the different versions of the 822 file can't be disclosed or else little ole me will be in deep trouble!

The Good

Fortunately, the guide is available for sale from the AFP (not a sales pitch).  Of course, I know most banks have their own 822 implementation guide which they follow and sample 822 file which they distribute to their employees/contractors.  However, this has only allowed people like myself to easily distinguish one bad file from another.

The Myths

1. How a bank decides to format their EDI 822 file is correct.  It most definitely is not correct and I wish more receivers of these 822 files would demand the correct format instead of accepting the explanations given as final.  Also, anything "bank-specific" is contrary to the definition of "industry standard".  
2. Knowing how each bank sends its EDI 822 file is important.  Knowing how and what data your bank sends on the EDI 822 file is important.  Also, knowing how it should be sent can be important whether you have an Account Analysis software program or not.  This info is important to know for you, the Treasury dept, who pays the bank fees each period.
3. The bank's EDI department is staffed with EDI 822 experts.  Due to my experiences, I have lowered my expectations because I've spent more time explaining basics to the very people who ought to know since they are the ones in charge of formatting decisions and its execution.  Always strive to know more than to put your trust in someone else.

It is good that people seek knowledge and answers to something which they do not have a thorough understanding.  So, I will continue to use those keyword searches to write something more informative to assist as best I can without crossing any lines.  Also, any 822 file questions I receive I will attempt to address directly.

Happy Analyzing!

I am a CTP!

This week I passed the Certified Treasury Professional (CTP) exam.

This was my 2nd attempt; my 1st was during the June-July 2011 testing window where I missed the mark by 5 weighted points.  Or, maybe it was 5 weighted average points.  Whatever the exact wording, I remember seeing the number 5...so close yet so far away.

What is the CTP?

The CTP is an Association for Financial Professionals (AFP) certification exam.  According to the AFP website, "The Certified Treasury Professional (CTP) certification serves as a benchmark of competency in the finance profession and is recognized as the leading credential in corporate treasury worldwide."

For me, why the CTP?

It can feel demoralizing when Treasurers, Asst Treasurers, and/or Treasury Analysts contact you for the most efficient ways to do their account analysis each month yet not view you as their equal.  Based on some comments, I knew that without the CTP I may always be viewed as inept so I wanted to change that. However, not all Treasury departments require the CTP.

Also, one of my best Accounting professors (Husam Abu Khadra, PhD, CFFA and IFRS certified) always stressed the importance of certification exams to our class.  You gain respect and an even footing when you earn a certification of those whom you aspire to follow in a field you desire to either get into or move up in.  A certificate in your ideal area is a great accompaniment to a degree.  For me, it was about respect and future career goals I have for myself.  Most do not understand Account Analysis but those in my field do recognize the significance of the 3 letters I've earned.

Lastly, David K. Waltz, author of the Treasury Cafe blog, has been very supportive.  His blog focuses on topics of Treasury that I have not reached yet so it's my education outside of the classroom.  He's been a great mentor and introduced me to many experts within the Treasury field.  

How did I Prepare?

I purchased the Essentials of Treasury Management, 3rd Edition from AFP but I didn't purchase any prep courses or the AFP Learning System.  In an effort to save money, I instead purchased a membership to TMExam and bought a copy of Preparing for Treasury Management Certification, 3rd Edition.  Both the Preparing for Treasury Mgmt book and the TMExam site were recommended to me by other CTPs. Also, repetition and writing works for me. Writing down concepts or formulas even multiple times helped me recall them because I could close my eyes and visualize the list or paper I'd grown accustomed to seeing.  

After failing the exam the first time around, I decided to take a break and finish my Masters in Accounting (MSA).  Surprisingly, this gave me a very good foundation on many concepts I needed to learn for the Treasury exam. You'd think Accounting would have nothing to do with Treasury but, at least for my program, we had to understand how the accounting of things can directly affect a business and its revenue decisions.

I found an overlap in these areas: types of bonds & stocks (and pros/cons to each), inventory accounting methods, aging schedules/DSO, COGS, financing options, collateral, constructing financial statements which led to financial ratios, auditing, etc.  My most influential courses were Cost Accounting, Asset Valuation, Income Determination, and my capstone class which required us to apply all we'd learned as Accounting students to make financial decisions operating our fictitious business.

Indefinite Study Break

I'm ecstatic I passed and I'm glad to have a break from studying.  I've both gained and strengthen several areas of understanding while feeling this was the best move for me at this point in my career. Sometimes I wish I was one of those people who got things right on the first try.  Other times, I know I have to try again just to prove something to myself.

Happy Analyzing!

Q&A: How to Calculate Earnings Allowance?

When I thought to write Q&A posts I assumed I'd run out of questions to answer but, from outside the field, very few Bankers or Treasurers understand Account Analysis so it has given me more to write about and - hopefully - this space remains informative.

What is required to calculate the Earnings Allowance?

Calculating your Earnings Allowance (EA) requires:

1. A Collected Balance (CB)
2. The Earnings Credit Rate (ECR)
3. The Reserve Requirement (RR)
4. Days in the Period (DP)
5. Days in the Year (DY)

Where, EA = CB * (1-RR) * ECR * (DP/DY)

In some instances where the month itself is unknown so you cannot accurately calculate whether there are 30 days versus 31 days in the period, some calculations use the following:

EA = CB * (1-RR) * ECR/12

Can you calculate EA without a Collected Balance?

Sure, you can but I wouldn't call it an Earnings Allowance.  If the Earnings Allowance relies on a Collected Balance to determine how much that balance has "earned" to offset qualifying bank service fees, then how can you calculate EA without it?  The answer received...

There is no standard!

Umm.  Yes, that is theoretically correct; there is no standard because no one felt they needed to standardize such a thing.   

When there is difficulty figuring out how your bank is calculating the Earning Allowance (or anything for that matter), the best thing to do is to ask the bank to provide you their calculation formula.  Not including a Collected Balance in an Earnings Allowance calculation formula might appear to be a typo at first until you get a response such as, "there is no standard!"  At that point, you may assume the attitude is, "we can do whatever we want and make up calculations because no one has told us we can't."  

Ask questions and ask them often even requiring an explanation for things that just do not compute.  

Happy Analyzing!

Fee vs Balance Compensation

There are two strategies a treasury department can pursue when determining how to pay their bank fees; Fee or Balance Compensation.

Fee-Based Method

With a fee-based method, Treasurers maintain low account balances fully aware that they will not earn much by way of an earnings allowance.  Why this strategy?  The intent with this method is to forgo any potential earnings allowance and instead pay the service fees incurred. Since the ECR of most corporate accounts have been ridiculously low, most can find investments with higher returns than the bank-offered ECR elsewhere.  When considering the earnings potential of excess funds, the fee-based method may be the best strategy.  Outside of investing, paying down high interest debt is also a great alternative for excess funds.

Balance-Based Method

With a balance-based method, Treasurers maintain certain balances in their accounts to earn enough earnings allowance which then offsets qualifying bank service fees.  Why this strategy?  The ECR is not too low compared to other investment options, the balance compensation method covers the service fees incurred, and the company may stand to gain some benefit from the bank by maintaining high account balances.

Company's vs Bank's Perspective

Neither strategy has consistent pros or cons since both depend greatly on the needs of the company at a given time.  Also, there are other issues to consider such as taxes and the liability of accounting for those high bank balances. Above are some reasons why the Fee-Based or Balance-Based Compensation method is used from a Treasurer's perspective; there are also various reasons to consider from a bank's perspective as well. However, since my day job consists of helping companies save on their bank fees, we will ignore the bank's perspective.  But, it is good to know both and understand both sides of each strategy to understand who stands to gain in either and how best to negotiate, if needed.

One German bank in particular recently notified their balance-based compensation corporate account holders that their billing method will be changed to a fee-based method.  The reason cited for the change was the low interest environment and its currently financial impact.  Sometimes, Treasurers make the best decision possible in the interest of their company.  Other times, the decision is made for them.

Happy Analyzing!

Investable Balance (NIF) (7/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

Investable Balance (NIF)

The investable balance is the amount available for the bank to invest after the deduction of any reserve requirement so it's the net investable funds (NIF) available.

Investable Balance is one of the numbers used to calculate/audit the Earnings Allowance sent by the bank on an 822 file.  Some calculations call for the Available Balance * (1-RR), where RR is the Reserve Requirement, but the NIF is already that net value.

Lucky Number 7

In the math thus far, Investable Balance is the 7th balance on the Compensation side of the Account Analysis equation referred to as "Remember The Math":

         Average Positive Collected Balance
 less DDA Balance Reserve Requirement
         Investable Balance (NIF)

Because the Investable Balance may be used to calculate the Earnings Allowance and/or determine the minimum account balance needed to offset service charges it is one of the 14 key balances in Account Analysis.

Happy Analyzing!  

AFP Code or BSID Code

What is the difference between an AFP Code and a BSID Code?

This is a common question from Treasury staff either for their own understanding or to help them explain the difference (or what either one may be) to their Bank Relationship Rep/Manager.

On an EDI 822 file, you will usually see both an AFP and a BSID Code.  I say "usually" because the standard does allow for a bank to send both or only one of the two so long as correct formatting rules are followed.

AFP Service Codes

Formerly called TMA (Treasury Management Association) Service Codes, an AFP Code is a 6 digit code used to categorize and create an apples-to-apples comparison for bank service fees across various banks.  Recently, the AFP developed Global AFP Codes which are 8 digit codes used to categorize and compare international bank services.  Although the 6 digit domestic codes are still in wide use, we have seen some banks send global codes on Account Analysis files.  

For an AFP Code, the first and second pair of digits denotes a classification with the last two digits further classifying the bank service within that group.  Also, the code does allow for undefined services if a bank service does not fit any one category perfectly.  However, shoving too many services into an undefined bucket is counterproductive.  Once you become familiar with AFP Codes, you'll be able to at least identify a service grouping quickly from the first two digits.

An apples-to-apples comparison of one's bank services across different banks is only possible if the AFP Codes are mapped correctly.  For example, if 3 Treasury Analysts are mapping 1 bank service they each may decide on 3 different AFP codes determining on opinion and/or expertise alone.  Mapping of AFP Codes may be more of an art than a science but, when done as accurately as possible, it allows the account holder to analyze their bank service fees by category to determine many different things; level of activity, fee comparison, and/or number of undefined bank services which seem to fall through the cracks for reporting purposes.

BSID Code 

A Bank Service Identification (BSID) Code is an alphanumeric bank proprietary code.  Unlike the AFP, BSID codes are developed and assign to services by each individual bank so it does not offer an apples-to-apples comparison across banks but it does allow you to quickly identify a code when speaking with your bank rep about your bank fees.  

For a BSID Code, it allows the most benefit to track individual bank service fee history overtime and its level of activity.  BSID Codes do not require mapping since this is handled by the bank and sent through on the Account Analysis statement.  What I have found is that the paper statement usually doesn't include the BSID code so they are more likely to appear on an EDI 822 Account Analysis statement.  

Unlike AFP Codes, from the account holders perspective, there is no rhythm or reason to the assignment of BSID codes.  As it relates to an EDI 822 file, BSID codes are supposed to remain static.

How does this relate?

Of course, an AFP code and/or a BSID code may be found on an EDI 822 file.  Both classify bank services into comprehensible groupings to at least one party.  Both assist in the analysis and reporting of bank service fees.  And, both strive to make a bank service easy to identify with the Global AFP Codes opening the door to include international services as well.   It seems no topic is ever too elementary to write about when we all have specialized knowledge in select areas.  

Happy Analyzing!

Q&A: What is an 822 File?

When I thought to write Q&A posts I assumed I'd run out of questions to answer but, from outside the field, very few Bankers or Treasurers understand Account Analysis so it has given me more to write about and - hopefully - this space remains informative.

What is an 822 file?

An 822 file is an EDI (Electronic Data Interchange) transmission of a bank account statement; account balances, service activity, charges, service fees, applicable rates, adjustments, etc.  Also included is basic information such as the bank itself, its routing and transit number, the company/account holder, account names, account numbers, classification of account levels and various service and charge classifications.  The vast majority of bank account holders receive a paper and/or EDI 822 file monthly.

Which financial institutions can produce an 822 file?

Most of the big banks can produce an 822 file and a couple does so very well as far as adhering to the standard format.

A common misconception is that the 822 file shall always match the paper statement.  In theory, the same data should be translated from common layman's terms and dollar amounts found on the paper statement to an EDI format without altering the data itself.  In the event this does not happen, it is likely the EDI language is not understood and/or its format was not followed.

EDI is a terminology/format that is not as common as I'd originally thought.  For example, if they place the word "CREDIT" in any segment on the 822 file it will not read as "CREDIT" in EDI terminology. To communicate successfully, those responsible for the construction of the EDI 822 file must be fluent in the EDI 822 terminology and standard.

Without a good understanding, your file may be called an 822 but it's really just an alphanumeric file with special characters that Person A believes translates into something that Person B cannot comprehend.

Happy Analyzing!

Q&A: Adjustments

Q&A: Every question deserves an answer...

Balances, charges, and fees are sent on an EDI 822 file.  What happens if something was sent incorrectly or omitted entirely?  Usually, a bank sends a restated 822 file with the mistakes now corrected.  But, when a restated 822 file is not sent, any adjustment is made.

Adjustments (ADJs) are made on the bank's end, sent on the EDI 822 file, and then applied to the appropriate balances.

What is sent on the EDI 822 file?

From my end, I cannot see when the bank has made an adjustment until it is sent on the EDI 822 file.  At that point, I can tell...

1. Which charge/balance the ADJ is for
2. The amount of the ADJ
3. The original charge/balance amount
4. Whether the ADJ is for the current or prior period
5. When the original transaction requiring the ADJ occurred 
6. How the ADJ is being applied

Adjustments can be sent for either a ledger balance, float balance, or service charge.  All three have specific ways in which they must be formatted on the EDI 822 file according to AFP standards to signify to which of the above 3 areas the ADJ is for.  But, banks cannot just send the ADJ information alone.

Application is important...

There are 2 balances in particular whose sole purpose is to apply ADJs for either the ledger or float balances.

• Balance Adjustment – Prior Period Ledger
• Balance Adjustment Prior Period Average Float

Let's say your EDI 822 file has an ADJ for Ledger.  Based on the information sent you can see how ledger was adjusted, by how much it was adjusted, and for which period the adjustment applies.  The same goes for any float adjustment.

For service ADJs, these should be sent as service line items in the account's service detail section of the EDI 822 file.  Some are sent with "credit" or "adjustment" in the service description with the charge sent as a negative or positive to deduct that amount from the total service charges due.  But, each bank is different.

Without sending Balance Adjustment – Prior Period Ledger for a ledger ADJ, Balance Adjustment Prior Period Average Float for a float ADJ, or an adjustment service line item - the ADJs will not apply towards your final balances/charges so the information on the 822 file becomes nothing more than a memo entry.

Happy Analyzing!

*Have an Account Analysis question? Send me an email girlmeetaa@gmail.com

DDA Balance Reserve Requirement (6/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

DDA Balance Reserve Requirement

DDA means Demand Deposit Account.  A DDA is essentially your typical non-interest-bearing checking account you can open at just about any bank.

Prior to the Great Recession, the DDA Reserve Requirement balance for corporate accounts was ~10% of the Balance Subject to Reserve.  Balance Subject to Reserve is the final balance used by financial institutions to compute the balance percentage they will deduct for any reserve requirement.  This deducted amount is not subject to the Earned Credit Rate (ECR) of the account and thus not eligible for Earnings Allowance.

Why is this 10% reserve requirement (RR) deducted at all?

The Federal Reserve (Feds) required financial institutions to place 10% of their total deposits on reserve.  This 10% requirement must be sat aside at the Fed so it is exempt from any interest-bearing activities the bank would have otherwise invested it in. Most financial institutions make money off the deposits of their account holders.  You deposit funds into your account at Bank XYZ.  Bank XYZ then takes those deposited funds and loan them out, at interest, to some other entity thus making money off your money you've allowed the bank to "hold" for you.  If the funds are not loaned out, they are invested in various securities again potentially earning the bank a return off your money.

When the Feds implemented the 10% RR, this left the bank access to only 90% of their total deposited funds since they could no longer invest the other 10%.  The banks were losing out on the investment opportunities and potential earnings for this 10% so instead of absorbing that loss they passed that loss down to their corporate account holders.  Since the bank could not benefit from earning interest on the entire 100% of their deposits then neither would their corporate demand deposit account holders.  This 10% deduction from the account holder's end is shown in the DDA Reserve Requirement balance which is 10% of the Balance Subject to Reserve balance.

So, what changed the 10% RR rules?

For some time, Regulation Q prevented corporate DDA holders from earning interest on their bank account balances.  But, they are allowed an ECR which does not violate Reg Q since it is considered a "soft" interest.  According to Wikipedia, Reg Q was enforced from 1933 following the Glass-Steagall Act to 2010 when it was repealed by the Dodd-Frank Act.  What was also changed during the Great Recession was the Feds now allowing financial institutions to earn interest on their 10% RR.

No longer were financial institutions required to forego earnings on those funds sitting at the Fed.  This now gave 100% of the bank's deposit balances the right to earn interest which made it difficult for those same banks to justify the 10% RR they had passed down to their corporate DDA holders. This change was eventually reflected on the EDI 822 files when the DDA Reserve Requirement balance was sent as $0.00.  When one bank made the RR change there was a "hooray!" heard across the land (the small Account Analysis land).  This resulted in a little nudge to other corporate DDA customers asking them, "why isn't your bank now subjecting 100% of your balances to ECR? Hmm."

Current day Reserve Requirement calculations...

The following balances may play a part in the DDA Reserve Requirement calculation:

• Compensating Bal Req-Credit Facility-Subject to Reserve
• Other Balance Subject to Reserve

Both Compensating Bal Req-Credit Facility-Subject to Reserve and Other Balance Subject to Reserve may be sent but I don't usually check for them unless there's a calculation issue which will cause other subsequent balances to be off.

We have already discussed this balance which, as its name states, is the balance subject to the reserve:

• Balance Subject to Reserve

The balance which displays any reserve requirement deduction is:

• DDA Balance Reserve Requirement

This topic opened the door for both soft and hard interest to be seen on the EDI 822 Account Analysis files.  I have seen only one thus far so not enough data to compile an informative blog post.  We shall see...

Happy Analyzing!  

Q&A: Netting vs Summing Fees

Q&A: Every question deserves an answer...

Since both the Netting and Summing of fees involve an account's earnings allowance I'll start there.

Earnings Allowance is the dollar equivalent of the credit rate earned for the balances held in your account.  However, this earnings allowance can only cover analyzed charges so the netting or summing of fees will only involve these particular service charges.

When the earnings allowance of an account is more than the analyzed charges due for that same account, the account has an excess earnings allowance balance. 

When the earnings allowance of an account is less than the analyzed charges due for that same account, the account has a deficit earnings allowance balance.

Whether an excess or a deficit, this balance is shown as either Excess/Deficit Earnings Allowance or Excess/Deficit Earnings Allowance-Adjusted. 

What's the difference between Ex/Def EA and Ex/Def EA Adj?  

Ex/Def EA considers any adjustments to Earnings Allowance or Analyzed Charges.

So...

        Earnings Allowance
less Analyzed Service Charges
       Ex/Def Earnings Allowance

No adjustments? Then Ex/Def EA Adj should equal Ex/Def EA.

Adjustments? Then the difference between Ex/Def EA and Ex/Def EA Adj should equal the total adjustment amount.

What is Netting Fees versus Summing Fees?

If a financial institution allows a company to apply excess earnings allowance from one account to the deficit earnings allowance of another account, this is called Netting Fees.

If a financial institution does not allow a company to apply excess earnings allowance from one account to the deficit earnings allowance of another account, this is called Summing Fees.

Both of these scenarios involve two balance:

Excess/Deficit Earnings Allowance-Net Settlement Period to Date; the last place to hold a sign to indicate an excess or a deficit earnings allowance.

Excess/Deficit Earnings Allowance Due This Statement; indicates whether a Netting or Summing relationship exists since all excess balances zero out leaving only deficits.

Whether a bank does or does not allow netting, the excess for an account will appear as a positive value in Excess/Deficit Earnings Allowance-Net Settlement Period to Date while a deficit value will appear as a negative value.

If the bank does not allow netting, the excess for an account will appear as $0.00 in Excess/Deficit Earnings Allowance Due This Statement.  But, a deficit for an account will appear as an absolute value in Excess/Deficit Earnings Allowance Due This Statement since this balance can only carry a positive value.

Whether a bank does or does not allow netting, the excess for an account will appear as a positive value in Excess/Deficit Earnings Allowance-Net Settlement Period to Date while a deficit value will appear as a negative value.

Excess/Deficit Earnings Allowance Due This Statement tells the relationship...

Most know that numbers can tell a story; in this case, so does how those numbers appear in certain balances.  Have an Account Analysis question? Send me an email girlmeetaa@gmail.com

Happy Analyzing!

Average POSITIVE Collected Balance (5/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

Average POSITIVE Collected Balance

This balance may be pretty straightforward since its value is computed as Average Net Collected Balance plus Average Negative Collected Balance.

         Avg NET Collected Balance
plus  Avg NEG Collected Balance
         Avg POS Collected Balance

What is not included in the computation above is Balance Adjustment Prior Period Avg Float.  This balance, as its name states, is for any adjustments made to your Float balance from the prior period.  Since most adjustments from prior periods are sent during the current period, this balance will fall between the Avg Net Collected and the Avg Neg Collected.

        Avg NET Collected Balance
plus Balance Adj Prior Period Avg Float
plus Avg NEG Collected Balance                
        Avg POS Collected Balance

The balance in red because, as with all adjustments, an account may not have any from a prior period so this balance may be zero if it is sent at all.  If sent as a non-zero value, this balance may either be a negative or positive value which determines how its calculation is treated in the above equation.

Happy Analyzing!

**Note: Average NET Collected Balance has been updated**

Average NEGATIVE Collected Balance (4/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

Average NEGATIVE Collected Balance

This balance is sometimes referred to as Collected Overdraft (OD) Balance.  To compute this balance, the sum of the daily end-of-day uncollected balances (negative collected) in the analysis period is divided by the number of days of the analysis period.  Taking the sum divided by the days in period is what computes the average value for this balance.  Obviously, this balance will equal zero if there were no collected balance overdraws during the analysis period.

This balance should always be sent as a positive value (no negative sign).

Since this balance directly corresponds to any account ODs which occurred during the analysis period, you can expect to see corresponding service line items on the account statement.  Some example OD-related service descriptions are:

• Negative Collected Balance Fee
• Daily Overdraft Occurrence Fee
• Overdraft Interest
• Drafts Handling Charge
• Daily Ledger Overdraft
• NSF Items Paid/Returned

Happy Analyzing!

What are Waived Charges?

From my experience, banks send service charges one of four ways: analyzed, hard, waived, or debited.  Usually, most bank services are sent as analyzed charges on an account analysis statement but what are waived charges?

Waived means the charge for this bank service is not charged to the account holder so although the charge may be sent on the account analysis file, the charge is not part of the account's final billing invoice.

Waived Charges are sent on an account analysis statement as Service Charges - Line Item Waived. All waived charges for one account during a particular time frame should be shown in this balance. 

Service Charges - Line Item Waived is a memo balance. 

It serves only to display the total of all waived service charges for the period.

But, there is also another balance called Service Charges Waived.  While this is a memo balance, a sent value for this balance will be included in the calculation of bank services to compute the final total service charges due this statement. 

It creates a clean audit format where the account holder can track the calculations from beginning to end.

Most financial institutions do not send or know how to send waived charges.

One of the common complaints I get from customers is that their paper statement does not match the data captured from their EDI 822 file.  Once I check the raw data for sent service charges (which ones are analyzed, which ones are hard, etc) against the balances sent by the bank, it solves the mystery.  Although there are specific AFP balances for each service charge type, financial institutions usually don't know they exist.  This results in showing the bank how the charges are formatted on the file versus how they should be formatted on the file according to the AFP implementation standard for the EDI 822.

Note: one clue that a service charge may be waived is if the bank sends the charge as $0.00.  There may be both a sent price and a sent volume but the sent charge is $0.00.

Happy Analyzing!

Average NET Collected Balance (3/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

Average NET Collected Balance

This balance may be pretty straightforward since its value is computed as Average Net Ledger Balance less Average Float Balance.
  
    Avg NET Ledger Balance
less         Avg Float Balance
Avg NET Collected Balance

The Average Net Collected Balance is the sum of the daily collected balance over the number of days in the period.  This is the net balance because it doesn't include any pending yet-to-clear transactions so it's an accurate reflection of the account's available balance. 

What is not included in the computation above is Balance Adjustment Prior Period Ledger. This balance, as its name states, is for any adjustments made to your ledger balance from the prior period. Since most adjustments from prior periods are sent during the current period, this balance will fall between the Avg Net Ledger and the Avg Float.

        Avg NET Ledger Balance
+/-- Balance Adj Prior Period Ledger
less   Avg Float Balance                         
       Avg NET Collected Balance

The balance in red, as with all adjustments, may not be on an account statement from a prior period so this balance may be zero if it is sent at all. If sent as a non-zero value, this balance may be either a negative or positive value which determines its calculation in the above equation.

The important thing is know about the Avg Net Collected Balance is that some financial institutions may use this balance to calculate your account's Earnings Allowance.  Suddenly, this simple balance becomes very important to watch out for.

Happy Analyzing!

In The News: Image Replacement Document (IRD)

Periodically, I'll do a "In The News" post about an Account Analysis topic.

Today's topic: Image Replacement Documents (IRD).  

September 11, 2001 was a major push in creating Check 21 which allowed financial institutions (FIs) to clear paper transactions in lieu of paper checks by taking an image of the front and back of those checks and creating an IRD, also known as a Substitute Check.  This IRD served as a replacement for the paper check, sped up the clearing process, and allowed various payment systems to continue their operations.

In an IRD, the front of the check is captured as a digitized image as well as all components necessary to clear a paper check such as the Magnetic Ink Character Recognition (MICR) line, the amount of the check (if not already coded in the MICR line), the payor and their signature, the date, the drawee bank, and the payee.  From the back of the check, the signature of the payee is also captured.  This image replacement document results in a paper replica of the actual check.

Since FIs are constantly looking for ways to cut costs and remain competitive this has resulted in a push towards Remote Deposit Capture (RDC).  If you don't have a commercial account with a financial institution but you do have a personal bank account, an RDC would be the equivalent of what most big banks now allow their account holders to do remotely; use their smart phones to capture a picture of the front and back of any check the account holder wants to deposit.

I recently did this for one of my bank accounts.  I took a clear picture of the front of the check I want to deposit making sure the entire check was imaged in that one photo.  Next, I endorsed the back of the check and then took a picture of the back making sure the entire check was also in that image.  I uploaded both images to my bank via my mobile app and then I got a confirmation email shortly thereafter.  This is a Remote Deposit Capture because I essentially captured an image of my paper check for deposit from a remote (not physically at the bank) location.

An RDC is similar to an IRD minus the paper product which equals less cost.  

Capture the same pertinent information but without the paper = image payment clearing.  According to this recent article from American Banker, Wells Fargo is piloting the imaging technology in select branches with tentative plans to roll out the imaging technology to all of its state locations in 2014.

What does this mean for commercial bank account holders?  Quicker access to your funds since paper checks will now clear faster.

How does this tie into Account Analysis?

Many commercial account holders receive a service line item and charge for an Image Replacement Document (IRD) on their account analysis statement.  The service description may vary across banks but the description of the service provided does not.  The big banks have the tools in place to begin a push towards implementing imaging technology so, if all follow suit, we should expect the replacement of IRD service charges on the Account Analysis statement with RDC service charges.

Also, since it means less cost for the bank it's only natural to expect (and demand) a lesser charge for the account holders than using an IRD.  However, the smaller banks won't have the capabilities to move with the imaging technology so you, the account holder, may send an image to your smaller FI for presentment but that smaller FI will instead produce an IRD and charge you for it.

Don't expect RDC services for quite some time if you have accounts with smaller FIs.  

With change comes the importance of monitoring your Account Analysis statements to make sure you and/or your company are seeing the benefits of these changes and fairly so.

More info can be read about check processing here and about RDCs here.

Happy Analyzing!

Why is Account Analysis Worth Your Time?

Daily, I communicate with Treasurers, Assistant Treasurers, Treasury Analysts and/or Cash Managers.

Some are anal about their account analysis and take the task of saving the company money on its bank service fees as well as auditing its bank(s) very serious.  These are the ones I hear from often about the most minute of balance calculations to the more serious, "Omg my bank has been overcharging us for months!" which leads to some adjustments and credits coming their way.  Yayy!

Then there are the ones who never do anything more than compare the electronic statement (822 or BSB) against the paper statement.  If the bank sends the value twice on two different statements then it must be accurate. Right? Somewhere a trained auditor is scratching their head at this logic.

There are also the ones who simply don't care about their account analysis. They get the statement every month (or quarter) and just pay the bill (or allow the bank to direct debit their account for the fees due).

Common reasons as to why most Treasury departments neglect their Account Analysis: 

a) It's too time consuming
b) We just don't have the staff available
c) The software programs on the market are ridiculously expensive
d) The possible benefits just don't justify the costs
e) We are perfectly fine using Excel spreadsheet for those purposes.

My rebuttal?  Ok.

Today, my goal isn't to sell you something or tell you how important it is to ensure you are being charged correctly (and possibly fairly) for the services your company uses.  My goal isn't even to tell you how your relationship with your financial institution should be a truly give-get.  Why am I not trying to say these things?  For one, I'm a horrible sales person.  Two, I completely understand having to justify spending thousands of dollars to implement a new system whose costs might reap benefits (but, to this I do have a solution so contact me!)

Three, you can't convince someone to do something they have already decided isn't worth the time and effort.  

Or can you?

What if and, hear me out here, what if the amount of money you saved the company directly translated into money for you, the employee?  What if you could quantify, track, and record these savings to show the benefits of doing your account analysis not on a sporadic basis but on a regular basis.  What if someone decided to take a "how can I make myself look good, pad my resume and accomplishments, while at the same time making the company's bottom line look good too?" approach?

The best salesperson can sell you something you never thought you needed.  But, only someone with trained eyes can show you where you are bleeding money and teach you how to plug the hole.  Use those savings to justify a bonus and/or raise because, after all, you should get a cut of some of those savings.  Right?

I could go on and on about overcharges, undercharges, clever math, bundled service fees, pass-through charges, crappy ECRs, and even the difficulty of getting a refund or credit when you finally discover an error in your account analysis.  But....

It's not my money so why should I care.  

It's AMAZING how less motivated people are when they think this way.  Put yourself in the equation and maybe it will change your perspective.  Whether the current employer appreciates it or not, you have documented evidence in the value you have brought to the company and, let's be honest here, what company frowns on employees who save them money?

I recall several articles where the research shows money is not a motivator for employees to work harder than they have to.  Recognition for their accomplishments.  Accolades.  Appreciation.  Responsibility.  Autonomy.

Don't leave money on the table; whether it's your money or the company's money.

Give it some thought.

Happy Analyzing!

TWIST BSB and ISO BSB

Things are going international.  Or, things have gone international.  Actually, things have always been international but certain someones are late to the party.

When I began my career in Account Analysis, I familiarized myself with the ANSI X12 EDI 822 file; the domestic account analysis statement.  I learned the different versions of the 822; the various segments a bank can send; each position of those segments; how to read and interpret its data; and how to reformat or make minor corrections to the file, if needed.  I like to think I became an expert then along came the BSB and I realized something; you're only an expert until something new falls on your desk.

The TWIST BSB.  What is TWIST?

The Transaction Workflow Innovation Standards Team (TWIST) is a not-for-profit industry group with representatives from several key constituents.

What is a BSB? A Bank Service Billing (BSB) is a standard digital file for bank billing of primarily international services. 

As I stated earlier, the 822 file is for domestic use while the BSB is for international use accommodating various currencies, taxes, and utilizing international bank and account field codes.

Now, the ISO 20022 BSB is the new new. 

What is ISO? 

Industry Organization for Standardization.  Wait, that's IOS not ISO. I know...it confused me too in the beginning but I just rolled with it.

Here you can find more information about the ISO 20022 (camt.086) which is a "standardization approach used by all financial standards and initiatives".  I haven't gotten my hands on an actual ISO BSB yet since most financial institutions are still trying to create a good one....but, I'm sure I will very soon.  From my experience, having to correct a  file is the best way to learn about its components.

So, what's the difference between an 822 and a BSB file?

For starters, taxes usually aren't sent on an 822 file but they are definitely formatted to be sent in the TWIST BSB and also the ISO BSB.

There are a lot more currency types found in a BSB file than in an 822 file.

The formatting of data will look different and have different tag names between the 822 and BSB.

822 files are usually sent with an .822, .txt, doc, or .docx extension.  BSB files are sent with an .xml extension.

There's way more to it than that but the point was to explain the high-level differences and define each.

With the new ISO BSB, AFP Global Codes, and the slow but positive embrace of international accounting practices along with creating a standard for international treasury and account analysis, I foresee good things ahead.

Until then, happy analyzing!

What are Hard Charges?

From my experience, banks send service charges one of four ways: analyzed, hard, waived, or debited.  Usually, most bank services are sent as analyzed charges on an account analysis statement but what are hard charges?

A hard charge means it cannot be offset by any earnings allowance the account may have earned for the period.  This makes these service charges very important since any earnings earned can't be used to lower your total service fees due balance.

Hard Charges are sent on an account analysis statement as Service Charges - Non Balance Compensable.  

All hard charges for one account during a particular time frame should be shown as this balance.  In older versions of an EDI 822 file, the SER segment denotes a hard charge usually by sending the Balance Required field as 0.00.  Since the Balance Required field indicates the balance required in the bank account to offset $1 of service charges, it makes sense that for hard charges this field would be zero.

Why are Hard Charges important to know for Account Analysis?

As mentioned earlier, hard charges can't be offset by the earnings allowance so this makes them fee-based services.  A fee-based service means they will always incur a fee for their activity.  This reminds me of hybrid costs; fixed as far as the account holder will always expect to incur a fee which cannot be offset but also variable in that the amount of this fee is determined by the volume or the service's level of activity. Amongst other things, higher fixed costs may result in a higher breakeven point and/or higher operating leverages.

Happy Analyzing!

Average Float Balance (2/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

Average Float Balance

When I think of how to explain what is Float I think of banking.  On my bank statements, I usually see a line titled "Current Balance" and another line titled "Available Balance".  The "Current Balance" shows the amount of funds in my account plus any pending cash inflows or outflows in the form of debits or credits.  Since these are pending transactions, they have not cleared my account yet but will soon (usually in the next 1 or 2 business days).

So, since the money is still technically "in" my account it is accounted for in "Current Balance".  However, since that money is "reserved" for a pending transaction(s), it is not available for me to use so it is not accounted for in the "Available Balance" field.

For example, below are a list of transactions which occurred on 01/15/2013:

Beginning Balance: $305.67

Deep Dish Pizzeria ~ $26.99 (Pending Debit)
Hot Yoga Class Package ~ $52.00 (Pending Debit)

Current Balance*: $305.67
Available Balance: $226.68

Where is the $78.99?  It is "floating"...

The two pending debit transactions which amount to $78.99 are still included in the Current Balance but are excluded from the Available Balance because the Available Balance indicates the amount of funds the account holder has "available" to withdraw, invest, transfer, etc.

The Float Balance is the daily recorded balance for all pending transactions while the Average Float Balance is the sum of those daily float balances over the period divided by the number of days in that period.  

Since the Average Float Balance follows the Average Net Ledger Balance in the "Remember The Math" calculation, the Average Float Balance is that part of the ledger balance that is not available (pending) to the bank for its use and thus not available to the account holder for their use.

In some explanations, Ledger Balance is the "Current Balance" from my example above.  Ledger is the total sum of all transactions posted to an account but Float are those transactions subtracted from Ledger to arrive at your Available Balance; which is balance #3 of the 14 in my Remember The Math series.

This is how I grasped the concept of Average Float Balance.

Happy Analyzing!

*Many financial institutions have varying titles for this balance.

What are Analyzed Charges?

From my experience, banks send service charges one of four ways: analyzed, hard, waived, or debited.  Usually, most bank services are sent as analyzed charges on an account analysis statement but what does this mean?

Analyzed means the charge for this bank service can be offset by any earnings allowance the account has earned for the period.

If your account's total analyzed charges for the month is $343.23 but your earnings allowance is $51.84 then that means you should owe the bank an amount of $343.23 less $51.84.

Analyzed Charges are sent on an account analysis statement as Service Charges - Balance Compensable.  All analyzed charges for one account during a particular time frame should be shown as this balance.  This balance is always a positive number but does not include any adjustments.  It is pre-adjustments, if applicable.

Why are Analyzed Charges important to know for Account Analysis?

First, most Treasurers' job responsibility is to lower costs namely those of bank fees.  If the cost of bank services at one bank makes the earnings allowance worth it since this earnings allowance can be applied towards total analyzed charges, then why would this charge NOT be important?

Since the Great Recession, we have seen Earned Credit Rates (ECR) plummet to barely anything worth mentioning.  Due to this lowered rate, balances kept in accounts are often not worth the charges incurred for the bank services.

Since the ECR determines the amount of earnings allowance which in turn determines how much money a company can save on their bank fees, this can help better estimate how much fees to incur per account to offset those fees against your estimated earnings allowance.

Why spend more than you have to??

Now, there are different suggestions to consider which can eliminate certain bank fees or even get you better rates for those bank services but that's another topic...and totally strategic.

Until then...Happy Analyzing!

Average NET Ledger Balance (1/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

Average NET Ledger Balance

The ledger balance is derived from Accounting. Here is where all debits and credits for an account are posted; to the ledger. This balance will include all debits and credits whether or not they have cleared the account (debit) or posted to the account (credit). In simple terms, a debit to an account is a subtraction of funds from the account while a credit to an account is an addition of funds to the account. 

The ledger balance is recorded per account on a daily basis.  At the end of a reporting period, the sum of those daily balances is computed and divided by the number of days in that period to arrive at the average.  That final balance, negative or positive, determines its net balance.

In some instances, there may be both an average positive ledger balance and an average negative ledger balance.  The Average POSITIVE Ledger Balance less Average NEGATIVE Ledger Balance is then the net balance of the ledger for that account.  And, in some instances, you will only see the Average NET Ledger Balance so no further computing is necessary.

Once both the Average POSITIVE Ledger Balance and the Average NEGATIVE Ledger Balance have been computed, you will arrive at the Average NET Ledger Balance as follows:

    Avg POSITIVE Ledger Balance

+  Avg NEGATIVE Ledger Balance

    Avg NET Ledger Balance            

This is usually the first balance you will see on your Account Analysis statement from your financial institution.  If you know how the bank arrives at this number, you have gained a better understanding of the balance itself and its relationship with Accounting.

Happy Analyzing! 

ANSI X12 EDI 822

For commercial domestic (US) account analysis, most companies receive what is called an ANSI X12 EDI 822 file from their financial institution(s).

What is ANSI X12?  ANSI stands for the American National Standards Institute.  X12 is a standard transaction set used mostly in North America.  Its format consists of loops, delimiters, and segment terminators.  Various sections of an ANSI X12 file have their own "label" such as the ISA/ISE, the GS/GE, or the ST/SE envelopes.  The "/" for each relationship indicates a header/trailer grouping. 

So, for an 822 file, the ISA envelope heads the file while the IEA envelope trails it.  The same goes for GS/GE and ST/SE.  I've had success keeping the headers and trailers straight by remembering the "E" trails; since ISE, GE, and SE all have the letter "E" while ISA, GS, and ST do not. 

Lastly, EDI means Electronic Data Interchange; an electronic format of what would otherwise be a paper statement. I like to highlight the first letter of each word in an acronym so I can visually see how the acronym came about. I've come across many an acronym where I've thought to myself, "Really?! That's the best you guys could come up with from this??"

The 822 is one of many transaction sets available but the only one used specifically for account analysis.

Commercial Account Analysis = ANSI X12 EDI 822.

An 822 file is usually delivered in a .txt, doc, .docx, or .822 format.  From my time in account analysis, I've only worked with two versions of the 822 file; the 3040 and the 4010.  There may be versions prior to the 3040 and there may be versions after the 4010.  I don't concern myself with it until it falls on my desk or in my inbox. 

In an 822 file, the company should receive information about their account balances, service charges, bank fees, adjustments/credits, rates, as well as any earned credit in the form of an earnings allowance.  Some of this information falls between the header/trailer envelopes and are preceded by account records. 

The segments denoting an account usually include the account name, account number, and account level.  Following an account segment, you should see charges and compensations for the balances of that particular account followed next by specific service activity information for this account.   Know that each new account segment begins an account record so the presence of the next account segment signifies the end of the previous record.

In addition to the company's breakdown of fees and charges, one can also find other information such as the date when the file was produced, the time period for which the data of the file relates, the bank's routing transit number (RTN), the bank's location, etc.  This information is usually found at the beginning of the file following the header/trailer envelopes.  If there is more than one bank RTN present in the 822 file, there should be a separate ISA/ISE envelope indicating that the first file has ended and a new file with data relating to a different RTN is beginning. 

Contrary to what it appears, there is an order to the data which can easily be seen by "unwrapping" the 822 file.  Most, but not all, EDI 822 files are delivered "wrapped" which means it consists of one continuous string of data that is not separated by any identifiable break point. However, if you "unwrap" an 822 file you can easily identify the header/trailer envelopes as well as the data itself.

To "unwrap" means to break up the one continuous string of data and place each individual segment at the start of its own line in the file. This allows you to read it from left to right in some kind of order. The steps I've learned to unwrap an 822 file are found using Microsoft Word. 

1. Ctrl A
2. Ctrl H
3. Type ^p in the Find what field, leave the Replace with field blank, and then select Replace All.
4. Type the file's segment terminator in the Find what field. Then, type the file's segment terminator and ^p (no space) into the Replace with field.  Select Replace All. 

Step 1: this highlights the entire document.

Step 2: this opens the "Find and Replace" feature in MS Word.

Step 3: for this step, leave the "Replace" field blank. After you select "Replace All"   you will get a pop-up window telling you the number of rows affected and if you want to continue the same for the entire document.

Step 4: the segment terminator literally terminators the segment. It's like a period in a regular everyday sentence; the end of a statement, thought, phrase, etc. Most segment terminators are "\" or "~". For untrained eyes, finding it is the issue.  So, for this step, your Replace with field may look like this: ~^p

Once complete, you should be able to read the 822 file from left to right per line. If you cannot, you did something wrong so try again.

Happy Analyzing!