Lockbox Agreement Definition

Part of lock-box processing is daily, allowing companies to increase their control and efficiency in debt management while improving audit controls and data security. Businesses benefit from enhanced reporting features with daily access to deposit amounts, fund availability and payment information, including electronic payment images and processed coupons. On the other hand, the bank lockbox can also be very risky. Bank employees who have access to lockers are rarely monitored, which opens the door to possible fraud. Fraud is mainly in the form of tampering with control, because the cheques in the lock boxes provide all the information necessary for counterfeiting. Transaction costs for lock-box services can be as high as $1.00 per transfer processed up to less than 10 cents. A company sets up a mailbox to receive payments from customers. The Bank curses daily deposits and communications at its processing centre. Company transfer documents are scanned, payment information is recorded and settlement updates are passed on to debtors. Every night, the company`s lock-box data is backed up for secure memory and easy access. An electronic lockbox service replaces the physical address of a traditional box with a digital web address and replaces paper cheques with electronic means such as eChecks, ACH, debit cards, credit cards and electronic bank transfers. These electronic lockboxes are a natural development of physical decoys and aim to further improve the requirements for speed, safety, efficiency and cost.

As with most payment processing services, Lockbox Bank has advantages and disadvantages. It offers businesses a very efficient way to deposit customer payments. This is particularly advantageous when a company is unable to deposit cheques on time or when it is constantly receiving payments from customers in the mail. Also known as transfer processing, a lockbox simplifies the collection and processing of cheques received by customers. They are often used by companies operating on several sites and are popular in urban areas. Lockbox accounts allow businesses to process payments within 24 hours, which speeds up cash collection. For companies that receive a large number of payments or headlines with transfer documents, a lock-box agreement can streamline the processing of collections and payments. With advanced lock-box technology, banks have set up several communication hubs that companies can use for payments and deposits.

Many online e-billing services are not 100 percent online. The recipient may not be designed to accept electronic payments, so the invoice payment service prints a large number of paper cheques and then sends them to the locker where they are processed with all other paper cheques. One of the advantages of lock-box service for the commercial customer is that it can manage special mailboxes at different locations in the country and a customer sends the payment to the nearest lockbox. The company then authorizes a bank to check these mailboxes as often as reasonably, given the number of payments received. Because the bank collects, the funds received are immediately deposited into the company`s account without being dealt with by the company`s accounting system, which speeds up cash collection. [Important: a company can protect itself against such fraud by using a bank that trusts it and by constantly monitoring its lockbox.] In our part 2 of our Lockbox guide, we learn more about how electronic lockboxes work: the benefits of eLockboxes and modern billing portals.

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