The benefits of a lockbox arrangement with a bank are maximized when the system is customized for your specific business needs.
Typically, a lockbox is set up by establishing a post office box that’s separate from your company’s standard address. When your customers send payments to this special mailbox, the bank collects them, deposits funds in your account, and scans the remittance slips and checks.
Benefits include faster mail float, enhanced security, and improved accounts receivable management. However, some businesses are hesitant to use this system because of the cost and time involved in processing incoming payments.
The costs of using a lockbox can be surprisingly high, especially if your business receives thousands of checks per month. Generally, banks charge a fixed fee and a transaction fee for each payment processed.
In addition to these fees, the banking system requires a certain number of employees to maintain a lockbox, and it can take a few days for these people to be trained in how to process payments. This can add to your operating expenses and reduce your cash flow.
While this system can be helpful for businesses in rural areas that don’t have the ability to handle payments electronically, it’s still not as effective as digital methods. It’s still slow to process and can result in a delay when funds are transferred from the lockbox to your organization’s account.
Fortunately, banks today offer many flexible options for a lockbox. They can provide customizable reporting for their lockbox clients, and they can even create a data file that’s directly uploaded to your accounting system. This helps you manage your receivables more efficiently and reduces the need for an account receivable clerk.