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How Bank Lockbox Services Work

How Bank Lockbox Services Work

Many businesses use bank lockbox services to simplify payment reconciliation and reduce the accounts receivable staff workload. However, the process can be flawed and prone to errors.

Some banks offer multiple geographic lockbox locations to reduce mail float (the time it takes for a check to travel from the payer to the business).


While a lockbox can significantly speed up converting check payments to cash, it doesn’t replace the need for accounts receivable staff to match incoming checks to open invoices in the accounting system. This can still be a manual process, especially for large volumes of payment transactions.

Bank lockbox services near me provide a more efficient way to collect business-to-business check payments in an offsite location. Rather than directing customers to a specific P.O. box, a company can direct them to a single bank lockbox location where the bank processes each payment and scans each associated remittance information item for a daily or multiple-times-per-day deposit. The bank then sends a report to the company, and each check and accompanying remittance data can be integrated into a company’s financial records automatically.

A bank lockbox service also speeds up payment processing by reducing the time it takes for mail to reach the banking facility. In addition, the banks have special zip codes for lockbox payments, which can fast-track these mail items through the postal system to help ensure the checks arrive on time. Moreover, many lockbox services can accept and process these mail items outside of regular bank hours, giving the companies greater flexibility in processing operations. Despite these advantages, businesses must still perform due diligence on the service providers to ensure they fit their needs well. Following up on references or conducting a site visit are good ways to assess the quality of a bank lockbox service.


When a company receives customer checks, they are sent to a bank lockbox rather than the business’s physical address. The bank staff picks up the contents of the lockbox multiple times a day, processes them, and then deposits them into the business’s bank account. This cuts days off of the accounts receivable processing process.

A lockbox service also takes some work off accounting departments, saving companies money on payroll and other expenses. However, businesses must evaluate their accounts receivable management needs before implementing a lockbox service because fees are associated with the service.

Typically, a bank will charge a setup fee and then a monthly or per-transaction fee to run the lockbox service. This can add up to a significant amount of money over time, and businesses need to calculate these costs before deciding to implement a lockbox service.

The most significant benefit of a lockbox service is that it reduces processing costs and speeds up the time it takes to convert payments into cash for companies. This is because the bank collects and processes checks from all over the country, eliminating the need for a company to send invoices to customers or travel to banks to deposit checks in person. Additionally, the bank provides a data file to the company that contains all of the payment information from each check it processes, which makes reconciliation easier and faster.


Using a bank lockbox saves businesses the trouble of processing their payments in-house. When a company’s customers mail checks to the service, the bank collects them, scans and processes them in digital format, then deposits them into the business’s account. The bank also updates information in the company’s accounts receivable portal to reflect the payments received. This offloads the company’s accounting department from collecting physical payments, converting them to electronic forms, depositing them, and matching payments against open invoices.

Modernized services digitize payment remittance documents, including front and back check images, payment stubs, and envelopes. These digitally preserved records reduce paperwork and provide faster access to payment data. The bank can even send this information in a file that directly interfaces with the company’s accounting system, further reducing manual efforts and accelerating update times.

This automation can also alleviate the strain on a cash management team during peak activity. Shifting these payment processing responsibilities to a bank lockbox service allows the company to maintain operational efficiency and customer satisfaction. In addition, the service’s automated processes can help reduce expenses and improve efficiency by reducing staff costs related to handling paper payments.


Businesses that use bank lockbox services contract with a third-party processor to collect and handle their incoming payments.

In addition to reducing processing time, bank lockbox services also improve the accuracy of accounting information. They reduce the number of manual processes that can introduce errors into the company’s financial system and allow a company to update its accounting systems more quickly.

A company that receives a high volume of check payments can save significant time and money with a bank lockbox service. The service takes the pain out of collecting, converting, and depositing customer payments, allowing accountants to focus on higher-value work like strategic planning and revenue forecasting.

While the primary benefit of a bank lockbox is a reduction in processing time, more is needed to solve the problem of reconciling payments with open invoices. While some companies can streamline the process with remote deposit capture and a robust automated data aggregation platform, others need something more comprehensive. Fortunately, companies automate the cash application process with an artificial intelligence-based multi-OCR engine and support automatic data aggregation in web portals.

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