Do you know the benefits of accounts receivable automation? Traditionally, a bank lockbox has been used by company Accounts Receivable departments to increase expediency.
Lockboxes have been around for many years and a lot of the conventional bank lockbox's lifespan has been used for capturing payment data associated with payments made by check. Mainstream provided this service to improve effectiveness and flow of company transactions streamlining the accounts receivables collection method.
Clients basically leverage the bank lockbox to receive check payments in one consistent location.
Bank lockboxes are purposefully placed in a central location to decrease 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 productivity. The cost of the bank lockbox is typically a monthly fee along with a per line remittance data processing cost. To process a large number of checks over time can be expensive 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.
Disadvantages of a Traditional Bank Lockbox
The lockbox could be fairly costly . Banks usuallyearn a monthly rate as well as a per line rate related toprocessing payment remittance detail .
Lockboxes may include security concerns . The traditional bank lockbox still takes a decent level of manual re-keying data . With the majority of manual data entry attendance being entry level-administrative staff who are a novice to the bank or an outsourced contractor . The data from the lockbox gives you all crucial components to make a fraudulent check .
Lockboxes don’t connect into your accounting system . Bank lockboxes process the payments and remittance more info data and thenforward you the information . Your team still must key in that information into your ERP to clear the cash .
Traditional Bank Lockboxes Are Causing a predicament for your Customers' AP Department . Organizations are modernizing their AP Department to eliminate manual task and preferring to pay their clients electronically via ACH , Credit Card or vCard . These desired methods of ePayment are generating an increase in email remittance . FinTech solution companies have bridged the gap to helpthose corporations in an economical scalable solution for automating Accounts Receivable .
Pros of a FinTech Lockbox
Reduction Cost
The major goal of the FinTech Lockbox is usually to reducefees per transaction and produce an Accounts Receivable automation application to helpcompanies to rapidly clear cash and facilitate access to your working capital .
Simple payment trail
It is easy to track incoming ePayments in one place. Instead of flipping through remittance emails or going to the vendor portal to get payment information . The AR Lockbox provides you with one destination to hold ALL your incoming electronic payments created for swifter cash application .
Eliminates mail float
Mail float is a term for the time required for a check to go from the payer to the payee through the postal service . With the increase in B2B payments electronically , mail float is rapidly turning into a thingof the past . The increase in electronic payments using FinTech Lockboxes with a major focus on the rate reduction and speed in which you clear cash and apply it to your working capital .