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Straight Through Processing (STP): Definition, How It Works & More

MHC Team     June 30th, 2021 

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The concept of straight through processing (STP) comes up across many sectors, from securities trading to accounts payable and accounts receivable. But what does straight through processing mean, exactly? We’ll walk you through the definition of straight through processing, why it matters for a modern business, and how it works.

What Is Straight Through Processing (STP)?

Straight through processing, or STP, refers to the processing of financial transactions electronically and automatically without manual oversight. Without straight through processing, when a business wants to transfer money to another party, the process is multi-stepped, requiring various people across multiple departments, and sometimes even paper checks. But, as the term suggests, straight through processing doesn’t need to make all of these stops with various parties—it happens in one fell swoop.

As such, many account-to-account payments are now carried out via straight through processing, and it’s increasingly popular among securities traders and accounts payable departments. For instance, an accounts payable process might include straight through processing to pay contractors, vendors, or employees via direct deposit.


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Benefits of Using Straight Through Processing

Clearly, straight through processing is easier than manual processing, but how, exactly? Some of the main benefits of making the switch to straight through processing include:


Reducing the amount of steps—and people—involved in processing a payment makes the whole process much faster. Making payments more quickly means you not only meet or exceed payment deadlines, but you’re also more likely to maintain good relationships with your clients, vendors, and any other people on the receiving end of your payment.

Plus, since your processing team can accomplish more in less time, it frees them up to focus on other, more complex tasks. In fact, one recent report from the Institute of Finance and Management’s (IOFM) found that implementing automation processes helped accounts payable departments process approximately twice as many invoices per full-time employee compared to organizations that had less automation.

No Errors


Straight through processing makes manual entry of payment data unnecessary, which eliminates errors like typos and misreading the information on relevant documents.

Small errors here and there might not seem like a big deal, but even minor mistakes can add up—particularly where numbers and decimal points are involved. For instance, AT&T’s cumulative invoicing errors resulted in years of overpaying vendors and likely millions of dollars in lost funds. Automated accounts payable processing means your data is cleaner, allowing you to make accurate, on-time payments.


It’s evident that cumulatively, these benefits lead to faster payment times, fewer errors, fewer late fees, and less work for your accounts payable department, compounding into time and financial savings. Indeed, a 2019 report by Levvel Research found that businesses that employed highly automated accounts payable processes spent, on average, only $2.36 per invoice; companies that implemented only minimal automation spent $15 per invoice. Clearly, investing in automation like straight through processing pays off.


How Straight Through Processing Works

Straight through processing is convenient for both those sending and receiving payments—but how does it actually work? Before the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and Automated Clearing Houses (ACH) were introduced in the 1970s, workers had to conduct payment transfers by telegraph, and operators were required on both ends. And that was just one step of the process, which typically also required phone calls, faxes, and eventually emails or other digital communications.

Now, businesses that want to use straight through processing simply need to connect with a payment processing network that carries out electronic transfers. (These networks are often associated with banks, but sometimes they’re independent.) Payment and routing information can be stored in the system, rather than manually entered for each payment.

Straight through processing technology has changed a lot over the years, but now, it’s more or less streamlined into these steps:

  1. Message capture: The sender of a payment sends a SWIFT message to the recipient. At this stage, no payment has been transferred.
  2. Message upload: A function on the receiving end interprets the SWIFT message, storing the details in the system.
  3. Funds transfer upload: Finally, the transfer is resolved and the sending and receiving accounts are updated accordingly.

Straight Through Processing and Your Accounts Payable Processes

Straight through processing is simply a way to automate transitions that cuts out manual middlemen when processing payments electronically. Since it’s faster and not prone to data entry errors, it saves valuable time and money for your business and helps improve or maintain good relationships with any parties that regularly receive payments from you.

When you’re ready to automate your accounts payable invoice processing workflows with straight through processing, MHC can help. MHC’s straight through processing capabilities are rooted in robust OCR technology that can easily extract data from paper and digital invoices. Then, depending on your preferences, MHC’s software either automatically sends that data to your ERP or routes it to the appropriate parties for approval—no manual handling necessary. Plus, MHC’s software integrates easily with your existing legacy ERP systems.

Want to learn more? Visit our website today to see how MHC’s solutions for your accounts payable department can help.

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