When you own a business, managing your cashflow is always top of mind. Sometimes processing your accounts receivable is an entire job in itself. For businesses that receive a lot of their payments by check, lockbox banking services may help to streamline the collection, processing, and posting of your payments. Businesses can use Lockbox Services to outsource much of their accounts receivable processes.
What Is Lockbox Services?
It is a service provided by banks, where customer payments are sent directly to a dedicated post office box instead of going to the business. The bank retrieves the payments from the box every day, processes them and deposits the funds directly into the business’s bank account. The bank then provides the business with reports of deposits including payor information, invoice numbers, etc so that it can be reconciled with their own records. This allows businesses to lower their internal processing costs, reduce the time it takes for checks to clear, and speed up your collections.
Pros and Cons of Lockbox Services
Pros
Lockbox services make collecting and processing payments more efficient. It keeps businesses from having to prepare deposits and physically bring checks to the bank to be processed. It reduces the likelihood of lost or stolen checks by minimizing the physical handling of collections as you receive them.
You’ll get detailed reports about each payment you receive, which makes it easier to spot trends and reconcile payments with your records. Sometimes lockbox services are even able to integrate with your business accounting software or deliver customized reporting, making your accounting process much simpler.
Cons
Using lockbox services does require the business to relinquish some control over how your payments are received. The efficiency and accuracy of lockbox services is up to the bank, so if there are delays or disruptions in the bank’s processing, it could affect how quickly your funds are available for use.
While lockbox services can process paper checks and electronic payments, it is not appropriate for all payment types. If your business receives payments via online platforms or mobile apps, you will probably need to continue to process those payments and account for them internally.
Who Can Benefit From These Services?
- Businesses who want to improve their cash flow by speeding up the collection and processing of payments.
- Business who wish to reduce staff workload or in-house costs related to processing customer payments.
- Businesses who receive a lot of payments by mail or in the form of paper checks.
- Businesses who have peak periods of remittances, creating an extra workload to prepare and process deposits.
- Businesses that process payments at multiple locations.
- Businesses who are looking for increased efficiency in receivables management, improved audit control, and data security.
Conclusion
Lockbox services can help businesses build a more efficient receivables process. By directing customer payments to a central location, processing and posting payments daily, and delivering detailed reporting, lockbox services takes a lot of the legwork out of getting paid. Business are also likely to have faster access to funds, improved cash flow management, and reduced administrative tasks, allowing them to focus on operating their business. If this sounds like something that would benefit your business, talk to a Farm Bureau Bank Treasury Management Solutions Specialist today by calling 855.445.5138 or emailing us at [email protected].
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