Lock box
Encyclopedia
Lock box banking is a service offered by commercial banks
that simplifies collection and processing of account receivables by having payments mailed directly to a location accessible by the bank.
(PO box) that is accessible by the bank. A company may set up a lock box service with their bank for receiving customers payments. The company's customers send their payments to the PO box. Then the bank collects and processes these payments directly depositing them to the company's account. Typical costs are around $100 per month with per-item fees for basic service, and upwards of $500 for businesses with high check volume.
Lockbox services are sometimes called 'Remittance Services' or 'Remittance Processing'.
This is when a company maintains special mailboxes in different locations around the country and a customer sends payment to the closest lockbox. The company then authorizes a bank to check these mailboxes as often as is reasonable, given the number of payments that will be received. Because the bank is making the collection, the funds that have been received are immediately deposited into the company’s account without first being processed by the company’s accounting system, thereby speeding up cash collection.
files). These files can then undergo data entry for further specialized processing. Banks often use specialized equipment that can scan hundreds, or thousands, of checks per minute.
Due to the Check 21 Act
, some lock boxes even wholly convert some checks to electronic data, and the paper checks are shredded and never actually returned to the originating bank.
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
that simplifies collection and processing of account receivables by having payments mailed directly to a location accessible by the bank.
General
In general, a lockbox is a Post office boxPost Office box
A post-office box or Post Office box is a uniquely addressable lockable box located on the premises of a post office station....
(PO box) that is accessible by the bank. A company may set up a lock box service with their bank for receiving customers payments. The company's customers send their payments to the PO box. Then the bank collects and processes these payments directly depositing them to the company's account. Typical costs are around $100 per month with per-item fees for basic service, and upwards of $500 for businesses with high check volume.
Lockbox services are sometimes called 'Remittance Services' or 'Remittance Processing'.
This is when a company maintains special mailboxes in different locations around the country and a customer sends payment to the closest lockbox. The company then authorizes a bank to check these mailboxes as often as is reasonable, given the number of payments that will be received. Because the bank is making the collection, the funds that have been received are immediately deposited into the company’s account without first being processed by the company’s accounting system, thereby speeding up cash collection.
Wholesale and retail
Lockbox is generally divided into Wholesale and Retail. Wholesale lockboxes are for companies with small numbers of payments, sometimes with detailed requirements for processing. This might be a company like a dentist's office or small manufacturing company. Retail lockboxes are for companies with large numbers of payments, often with a standardized 'payment coupon'. These are often utility companies such as gas, electric, water, or cable tv companies.Electronic conversion
Modern operations usually "capture" images of the checks and associated documentation (payment coupons, for example) into a digital format for use in computer systems (i.e., JPEGJPEG
In computing, JPEG . The degree of compression can be adjusted, allowing a selectable tradeoff between storage size and image quality. JPEG typically achieves 10:1 compression with little perceptible loss in image quality....
files). These files can then undergo data entry for further specialized processing. Banks often use specialized equipment that can scan hundreds, or thousands, of checks per minute.
Due to the Check 21 Act
Check 21 Act
The Check Clearing for the 21st Century Act is a United States federal law, , that was enacted on October 28, 2003 by the 108th Congress. The Check 21 Act took effect one year later on October 28, 2004...
, some lock boxes even wholly convert some checks to electronic data, and the paper checks are shredded and never actually returned to the originating bank.