Lockbox, what is it and how can it benefit my business? Lockbox is certainly not a new service that is offered by banks, though not every bank offers it. A lockbox is a safe processing location to perform the processing of payments for businesses. There are both wholesale and retail lockboxes and a combination of both is called a hybrid lockbox. Instead of companies having checks delivered to their office for their staff to process, it goes to a PO Box where payments are typically picked up by trained bank staff or bonded courier and brought to lockbox processing. Customer payments and remittance documents can be processed through a lockbox. Lockboxes will have faster turnaround time depending on the location of the lockbox, efficiency and experience of staff performing the operation.

A lockbox is not for every business. However, it is recommended for use in high volume accounts to help improve cash flows through receivables.  Typically, businesses that process several hundred checks per week and have outgrown other deposit solutions like Mobile Deposit or Remote Deposit Capture, would be ideal candidates for lockbox. Though electronic payments are increasing, businesses in the United States still process a higher volume of checks than European countries. Checks are still a critical part of the receivables process and therefore, a lockbox helps to reduce mail float. It shortens the processing time by having bank staff directly deposit payments into the bank account, ensuring payments are received and deposited same day. This eliminates time it takes to deliver checks to bank or have staff process and then present to bank.

In addition to checks, electronic payments supplementation and alternatives to traditional lockbox services are also available. For example, E-lockbox alternatives such as an online billing portal may be the next step in the progress beyond a traditional commercial lockbox service. An electronic lockbox service substitutes the physical address of a traditional lockbox with a digital web address and transfer paper checks to electronic forms of payments such as ACH, debit and credit card transactions, and electronic bank transfers. Elements of E-lockbox can be used in tandem with a traditional lockbox as well. ACH and credit card payments can be processed at the physical lockbox location where checks are processed, and even further taken the burden off of internal staff. 

By Melinda M. Toy

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