Thursday, 5 October 2017

As a business owner, cash flow is essential. But making daily check deposits can be a hassle. Lockbox banking simplifies the accounts receivable process. 

At its most basic functionality, lockbox services simplify the accounts receivable process and get your checks into the bank faster. Lockbox processing also comes with some bells and whistles that can help you post payments faster and give you a long-term archive of check and remittance payment documents.

What is lockbox banking? 

Banks offer lockbox services to help businesses streamline deposit processing and speed posting of remittances. To do this, the bank sets up a post office box, and you direct your customers to send their payments to the new address. 

The bank retrieves the payments, keys in the information for the business' records, and deposits the funds into the business' account. Typically, you can choose to receive the check and remittances document images online or in a data transmission for posting purposes.

There are two basic types of lockbox services:

  • Retail lockboxes are typically used by businesses with a high volume of low dollar checks which are typically mailed from consumers with a pre-printed remittance coupon.
  • Wholesale lockboxes are for companies with high dollar business-to-business payments.

If your business doesn't fall under these two descriptions, don't worry because some banks can customize a lockbox solution to meet your needs.

Benefits of lockbox services

Using lockbox services can add value to your business including some of the following, tangible benefits:

  • Faster payment processing: In order to minimize mail, processing and deposit time, a lockbox may be the right service to meet your needs. Lockbox services are specifically designed to compress the amount of time a check is in the mail and ultimately deposited into your business' account. Banks specialize in taking the delays out of the process by collecting and promptly depositing the checks for you. This is especially beneficial if you have customers in a large region or across the country. Banks can set up special post office boxes in key geographical areas, cutting back on transit time for payments. 
  • Improved receivables management: Having a bank process payments on your behalf supports your audit controls and improves accuracy of your data management. You can opt to have a data file created for uploading directly into your accounting system to close out open receivables. It also improves your client service as payments are received and recorded with minimal delay.
  • Accurate and timely information: One of the most beneficial aspects of lockbox services is that your business receives timely information on the receipt of your payments as the deposits are processed. This gives you immediate visibility to your cash flow. 

The content provided is for informational purposes only. Neither BBVA Compass, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial advisor about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA Compass or any of its affiliates. All accounts and credit are subject to approval, including credit approval. BBVA Compass is a trade name of Compass Bank, a member of the BBVA Group. Compass Bank is a Member FDIC.