Understanding "The Lock Box"
In the real estate industry, a lockbox is a box with a combination lock, placed on the wall outside a for-sale property. Prospective buyers are given the combination and can inspect the property at their convenience without the need for an agent to be on-site for every inspection.
A similar idea has been used by banks in developing their LockBox service. This is an electronic banking service that can free you from the tasks of mail collection, processing and depositing customers' payments. It's ideally suited to small businesses that receive payments by mail and want their money in the bank as soon as possible. It works like this: Mailed payments are received at a single, specially designated post office box and then delivered to the bank directly for processing. The difference between this special post office box and a regular post office box is that only your customers' payments are delivered to the LockBox.
Instead of you picking up the payments, your bank's courier has a key to the post office box. They pick up and deliver your customers' payments direct to your bank.
Bank personnel open the mail, extract all of the remittance advice data and amount details and collate all of this information into a daily file that is sent to you the same day. The file can be imported directly into your accounts receivable system.
Any correspondence from your customer that is enclosed with the payment is scanned and delivered to you via the Internet or on a CD. You can have the original paper copies as well if you want them.
In summary, LockBox offers you:
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Collection, processing and deposit of checks, money orders and credit card payments
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Daily reporting
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Fast reconciliation of payments against receivables
You can establish a LockBox in several different post offices or cities. A basic rule is that your LockBoxes should be set up near major customer locations so as to reduce the amount of time between your customers' mailing their payment and the deposit into your bank account.
LockBox banking cuts down on postal delays caused by having your customers' payments delivered to your business address. Mail delivered to your place of business entails sorting at the post office so that your mail gets into the hands of the correct carrier, plus the time it takes the carrier to actually deliver it to your address.
Using a LockBox shortens the amount of time necessary to process your customers' payments. Since the check goes directly from LockBox to bank, payments are received and deposited all within the same day. Doing this work yourself can delay the deposit of the payments depending on how long it takes you to process your customers' payments for deposit, and then to actually make the deposit at the bank.
LockBox banking was first used by organizations that receive large volumes of payments from numerous customers, like utility companies and governments.
Today's increased automation in payment processing has allowed banks to reduce the cost of their LockBox banking services enough to make it economical for businesses of a smaller size. Since most banks will customize their LockBox banking services and costs to fit your specific needs, you should contact your bank for more information. |
