Don’t Throw Out the Key: The Lockbox is Still Relevant in a Paperless Society

Raise your black veils and trample your flowers; we’re not attending the funeral of the paper check, and thus the lockbox, just yet. Business owners, shine up your keys.  

Yes, the paper check has seen a slow—and steady—decline, but 27.8 billion checks were written in 2009. Paid checks in the same year represented a value of $31.6 trillion and accounted for 22% of all non-cash payments made (The 2010 Federal Reserve Payments Study). Perhaps most tellingly, 52% of consumers still pay at least one bill via check, making it the most common method of bill payment (FIS Research Brief, July 2012). 

The ritual of check writing is firmly entrenched at the grocery store, for shopping, dining out, entertainment, and paying contractors and household help (FIS). The semi-mythical “paperless society” we’ve been breathlessly anticipating ever since the rise of online banking and bill pay has not yet arrived. At least for the foreseeable future, the paper check is here to stay, and so, too, is the lockbox.

What is a Lockbox?

Steady cash flow – the proverbial thorn in every business owner’s side. The answer to your woes is simple: the lockbox, a company mailbox maintained and operated by your bank or a third-party service provider. Lockboxes can be established in multiple locations convenient to your highest sources of cash flow to hasten the collection process.   

Customers mail their payments to your lockbox address where bank personnel open the mail and deposit the checks into your account. They use image capture technology to make electronic copies – front and back—of coupons, checks, invoices, and envelopes and send you a daily report. This data is also available to your employees through a secure online portal and may include images, reports, and exception transactions associated with each payment. 

Most banks’ lockbox services can be tailored to your organization’s needs and are generally divided into three categories:

• Wholesale Processing: Low volume, high dollar corporate-to-corporate payments requiring manual processing.
• Retail Processing: High volume, consumer-to-corporate payments in a highly automated processing environment, which uses scannable documents and image capture technology.
• Whole-tail Processing: Combines aspects of both Wholesale and Retail processing and usually includes customized remittance data processing.    

The Benefits

• Administrative Savings: Eliminates the costs associated with processing items in-house and protects against internal theft and check fraud.   
• Increased Funds Availability: Improves availability of funds by reducing mail and processing float. Your money is more readily accessible for deposit, investment, disbursement, or debt reduction.   
• Updated Customer Records: Immediate updates to customer records resulting from lockbox data transmission.
• Simplified Record Keeping: The automated system minimizes processing errors, providing a timely update of accounts receivable, producing an audit trail, endorsing specific items, and generating a report listing items in batch and sequence order. It retains detailed records of each captured image and can transfer files to a drive or CD-ROM for long-term storage. The system interfaces easily with all major networks and most accounting software.
• Same-Day Decisioning: Rejected payments can be viewed online for same-day decisioning and posting. 
• Uninterrupted Processing Workflow and Disaster Recovery: Because data is stored in the cloud, you’ll never lose access to your files or money due to a natural disaster or other calamity.

Will It Work For You?

Because of the associated processing fees, the lockbox is not cost-effective for every organization. It usually works best for businesses that process a large volume of payments, such as utility companies, property management companies, municipal authorities, manufacturing companies, medical billing companies, etc. However, because increased automation has significantly reduced the cost of payment processing, banks can be more flexible, customizing their services to fit ever smaller businesses with lower payment volume.

The lockbox is a highly effective cash flow tool and data management system that can enhance your efficiency and productivity and, ultimately, save you money. To learn more about how it may work for your business, contact your Cash Management Representative for an evaluation of your requirements and customized pricing options – the lockbox may hold the key to your success.