• Do your customers mail payments to you?
  • Are your customers dispersed across a region or the country?
  • Do you hold checks over a day or two because your staff doesn¹t have the time to process them?

    If so, you may want to consider the benefits of automated lockbox processing services.

    Using lockbox banking is a cash flow improvement technique in which you have your customers’ payments delivered to a special post office box instead of your business address.

    The difference between this special post office box and a regular post office box is that only your customers’ payments are delivered to the box. Instead of you picking up the payments, your bank’s couriers have a key to the post office box, and they remove its contents and deliver your customers’ payments to your bank. Your bank opens the payments and then processes the payments for deposit directly into your bank account. Depending on the nature of your business, the contents of your lockbox can be removed and processed once a day, or more often if required.

    You can establish lockboxes in several different post offices or cities. A basic rule is that your lockboxes should be set up nearest to your customers to reduce the amount of time between your customers’ mailing their payments and the deposit into your bank account.

    Lockbox banking accelerates the payment and deposit portion of your cash conversion period in two different ways. First, lockbox banking cuts down on any postal delays caused by having your customers’ payments delivered to your business address. Mail delivered to your place of business entails some extra sorting so that your mail gets into the hands of the correct carrier, not to mention the added time it takes the carrier to actually deliver it to your address. Second, using a lockbox shortens the amount of time necessary to process your customers’ payments, by having your bank open the payment envelopes and deposit them directly into your bank account. Since the payment processing is done at the bank, your customers’ payments are received and deposited all within the same day. Doing this work yourself can delay the deposit of the payments anywhere from one to two days depending on how long it takes you to process your customers’ payments for deposit, and to actually make the deposit at the bank.

    Lockbox banking is typically used by businesses that receive payments from numerous customers. Lockbox banking can be expensive but don’t shy away from lockbox banking just because your business isn’t as large. Many factors utilize lockbox banking to reduce cash conversion and speed up collections. The good news is most factors will incorporate the cost of the lockbox in the overall pricing so it is a win-win for clients!