Lockbox services have been around for decades as a way for businesses to safeguard their receivable process for checks and other payments sent through the mail. In the past, lockboxes were nothing more than a dedicated PO box at the post office. However, the U.S. mail service has reduced processing centers, mail moves slower and there is more opportunity for delays and fraud. Additionally, receiving payments by PO box is time-consuming. Your staff must retrieve the mail from the post office, then manually open and process each payment. 

Did you know that many banks, including Investors Community Bank, offer lockbox services? Using a bank lockbox service is faster and more secure than a traditional P.O. Box. Instead of handling incoming payments yourself (and waiting for those payments to come through the mail), payments go to a lockbox in a postal hub city, in this case, Milwaukee. 

Here’s How Lockbox Services Work

Your customers send their check payments to a bank-operated mailing address. The bank opens the mail, scans the payment and remittance information then deposits the funds to your business account. The scanned images are posted to a secure website, and your accounting staff can access the images to apply payments to the outstanding accounts receivable.

Types of Lockboxes

There are several different types of lockboxes available to businesses:

  • Wholesale: Used for larger, less frequent payments, such as business-to-business payments. Because these payments can be large, you may want the money to reach the bank faster. 
  • Retail: Used for large volumes of relatively small payments. 
  • Hybrid: A combination of high and low-volume business-to-business and consumer payments.

A lockbox can be utilized in any industry, and you do not need to be a certain size to use the service. We have worked with small companies with less than 100 monthly transactions, all the way up to large manufacturers

Benefits of a Lockbox

  1. Fast Payment: Normally, when customers send payments to your business, those funds need to be deposited. That means waiting until the payment arrives, sending someone to the bank with the deposits (or having the employee convert the payment to an electronic payment) and waiting for the funds to clear in your account. If you have a high volume of payments, it can take significant resources to process those payments. With a bank lockbox, the bank handles the processing for you, reducing the overall collections processing time.
  2. Improved Receivables Management: Having your bank process payments on your behalf supports your audit controls and improves the 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.
  3. 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 of your cash flow.

There are monthly fees for using this service, but when considering whether a lockbox is right for you, be sure to compare that to the time a staff member spends doing these tasks at the office. With a bank lockbox, that staff member is then freed up to work on other projects that bring value to your company.

Want to learn more?

To learn more about lockbox, its capabilities and the ways it can help you devote more time to the day-to-day aspects of running your business, please contact our Treasury Management team.

Written by Anne Denissen

Anne Denissen is Vice President - Treasury Management at Investors Community Bank. She holds a Bachelor of Arts degree in computer science from Lakeland College and has more than 20 years of banking experience. She helps guide each business to solutions that fit their needs and coordinates the implementation of treasury management services.

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