Bank Lockbox services reportedly trace their roots to the 1930s when banks wanted to collect debt that businesses owed them. Bank representatives were given access to collect receivables from the businesses’ post office boxes and processed the payments from there. Lockbox check collection was originated.
1930s Lockbox Service Process
The Evolution of Lockbox Services
Also called remittance processing, modern day Lockbox services offer check collection and processing in an off-site, controlled environment. In a basic explanation, a business asks its customers to address payments to a P.O. Box that goes straight to the Lockbox processor. Checks are collected, scanned, and deposited the same day, and a report is transmitted with the details of the deposit. Or, the information can be integrated automatically into accounting software.
Over the decades, as payment technology and banking services changed, bank Lockbox services gradually fell out of fashion, especially among businesses with lower check volumes. As scanning technology improved and became affordable, Remote Deposit Capture gained popularity in the 2000s, allowing businesses to scan and deposit checks at their office. For business-to-business companies, Remote Deposit Capture brought more efficiency to their operations as no one had to make trips to the bank to deposit checks.
2000s Remote Deposit Technology Process
You can see where this is going. Remote Deposit Capture works fairly well when staff are working onsite, in an office. It still provides an environment where check fraud can happen — such as checks being stolen and forged.
Pandemic Revival of Lockbox Services
The COVID-19 pandemic turned many daily life activities on their head, and it also affected business operations and payables. As many workers shifted home, at least for some time, no staff was on site to scan checks using Remote Deposit Capture. Checks sat in mailboxes while businesses tried to figure out new processes. Subsequently, business leaders looking for uninterrupted payment deposit while employees were either out sick or working flexibly at home, turned to Lockbox services.
2020 Revamped Lockbox Service Process
Along with other banking services, Lockbox also modernized. What was once a paper-intensive banking solution is now digital, more efficient, and easier to navigate. Clients can log in and see everything electronically, which provides greater benefit for businesses.
Benefits of Lockbox for Businesses
Working with businesses, we’ve found they experience several benefits from Lockbox services. These are just a few that we think makes all the difference for our clients.
- Greater efficiency. Employees no longer need pick up checks from anywhere — or scan them or drive them — to make a deposit. Automating this part of the business frees up employees to work on new initiatives or take on training for another role in your business. With the tight labor market plaguing businesses for the past several years, accomplishing more while not adding more staff is an efficiency win.
- Reliable continuity. Lockbox services are highly reliable and predictable, as you receive notice of deposits the same time every business day. Compare that to employees handling multiple duties who often get pulled away from depositing checks. Lockbox services are automated and consistent.
- Tighter security. Checks sent to a P.O. box and dealt with by a professional lockbox processor are infinitely more secure than checks that sit in mailboxes, on counters, in desks, or on tables. Checks are still the top B2B payment method and also the top payment method impacted by fraud. While the pandemic shifted more businesses than ever to electronic payment, checks — and check fraud — seem here to stay. Removing your employees and your office from your main source of income may seem counter intuitive. We like to trust our employees. We feel our offices are safe. Unfortunately, it’s not uncommon for businesses to experience forged or stolen checks. Lockbox services remove that scenario.
- Faster payments. Your check receivables sent by your customers to a P.O. Box arrive faster and are deposited more quickly than those delivered by a carrier, allowing you to access the funds quickly and predictably.
- Seamless integration. With a customization file, the daily lockbox report can integrate right into your business’s accounting software, so you don’t have to even enter the lockbox payments.
- HIPAA compliant. For health care organizations, such as hospitals, specialty HIPPA-compliant medical Lockbox services ensure checks and data are processed under strictly regulated conditions.
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Lockbox Services Case Studies
In April 2020, a manufacturing company swiftly made the move to Lockbox for check receivables. With office staff working remotely, checks hadn’t been deposited on a timely basis, which impacts cash flow and leaves the business at a much greater risk of experiencing a check fraud incident. Going forward, the company wanted to continue to offer its office staff flexibility to work remotely, and benefit from the reduced cost of less office space. They quickly implemented Lockbox services and found other benefits, as well.
“Lockbox services with First Business Bank have allowed us to continue to provide flexibility for our office staff, which allows us to retain these highly experienced people. Now we also don’t worry about who is picking up or scanning checks and how quickly we can get the funds deposited into our account.” – Client
In another example, a nonprofit organization, while benefiting from a consumer transition to digital payments, also still receives a high volume of check donations. The nonprofit relies on its generous donors to operate, and it has a slim staff that takes on multiple roles. They don’t have the operating budget to hire more people and need to automate office processes as much as possible. This organization likes the security aspect of Lockbox services, but also feels the efficiency of Lockbox is more than worth it.
“We would need to hire another person just to handle donations if it wasn’t for Lockbox services with First Business Bank. We’ve become even more grateful during the COVID-19 pandemic that we have Lockbox services so the processing of donations wasn’t interrupted. It has been worth it to us.” - Client