Do you know the advantages of accounts receivable automation? Conventionally, a bank lockbox has been used by company Accounts Receivable departments to increase efficiency.
Lockboxes have been around for decades and a lot of the traditional bank lockbox's life has been utilized for capturing payment information associated with payments made by check. Commercial banks provided this service to improve effectiveness and flow of company transactions simplifying the accounts receivables collection process.
Clients generally leverage the bank lockbox to receive check payments in one consistent location.
Bank lockboxes are strategically placed in a central location to reduce mail delivery time, which also helps with lowering the company’s Days Sales Outstanding (DSO). Banks receive the paper check, process it along with the remittance data and send the data back to their client. Because banks are processing checks and remittance this decreases the clients A/R workforce and increases their efficiency. The cost of the bank lockbox is typically a monthly fee along with a per line remittance data processing cost. To process a large amount of checks over time can be costly with a lockbox.
Today, we see a drastic shift with Accounts Payable Departments paying electronically. This shift to ePayments has elevated the FinTech trade with {solutions| designed with the goal of decreasing business costs of processing incoming payments.
Downsides of a Traditional Bank Lockbox
The lockbox can be relatively costly . Banks typicallyacquire a monthly rate in addition to a per line fee linked tohandling payment remittance detail .
Lockboxes can contain security issues . The traditional bank lockbox still requires a fair measure of manual re-keying information . With the majority of manual data entry attendance being entry level-administrative personnel who are new to the bank or an outsourced service provider . The details from the lockbox provides all needed components to make a fraudulent check .
Lockboxes don’t connect into your accounting system . Bank lockboxes process the payments and remittance information and thenforward you the information . Your organization still must input that data into your ERP to clear the cash .
Commercial Bank more info Lockboxes Are Creating a Problem for your Customers' AP Department . Corporations are modernizing their AP Department to get rid of manual process and opting to pay their customers electronically via ACH , Credit Card or vCard . These desired methods of ePayment are creating an increase in email remittance . FinTech solution businesses have bridged the gap to servethose companies in an economical scalable alternative for automating Accounts Receivable .
Rewards of a FinTech Lockbox
Reduced Cost
The primary goal of the FinTech Lockbox will be to decreasepricing per transaction and provide an Accounts Receivable automation application to allowbusinesses to rapidly clear cash and improve access to your working capital .
Trouble-free payment trail
You can easily track incoming ePayments from one location. Rather than flipping through remittance emails or going to the vendor portal to download and read payment data . The AR Lockbox gives you a single place to house ALL your incoming electronic payments meant for quicker cash application .
Removes mail float
Mail float is a term for the time needed for a check to go from the payer to the payee via the postal service . With the rise in B2B payments electronically , mail float is swiftly turning into a productof the past . The rise in electronic payments embracing FinTech Lockboxes with a primary focus on the cost reduction and speed at which you clear cash and apply it to your working capital .