Do you know the benefits of accounts receivable automation? Conventionally, a bank lockbox has been used by business Accounts Receivable departments to increase efficiency.
Lockboxes have been around for a while now and much of the traditional bank lockbox's life has been used for capturing payment information associated with payments made by check. Commercial banks provided this amenity to improve effectiveness and flow of business transactions streamlining the accounts receivables collection process.
Customers basically use 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 assists with lowering the company’s Days Sales Outstanding (DSO). Banks get the paper check, process it along with the remittance data and send the data back to their customer. 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 fee. To process a large number of checks over time can be expensive with a lockbox.
Today, we see a huge change with Accounts Payable Departments paying electronically. This shift to ePayments has revolutionized the FinTech trade with {solutions| designed with the goal of decreasing business costs of processing incoming payments.
Shortcomings of a Traditional Bank Lockbox
The lockbox can be fairly expensive . Banks typicallyacquire a monthly fee along with a per line rate related toprocessing payment remittance detail .
Lockboxes can include security concerns . The traditional bank lockbox still takes a fair amount of manual re-keying data . With the majority of manual data entry attendance being entry level-administrative employees who are new to the bank or an outsourced service provider . The data from the lockbox gives you all needed components to make a fraudulent check .
Lockboxes don’t tie into your accounting program . Bank lockboxes process the payments and remittance information thensend you the information . Your organization still must input that data into your ERP to clear the cash .
Financial Institution Lockboxes Are Causing difficulty for your Customers' AP Department . Businesses are modernizing their AP Department to remove manual task and deciding to pay their clients electronically via ACH , Credit Card or vCard . These preferred methods of ePayment are creating an increase in email remittance . FinTech solution companies have bridged the gap to servethose organizations in an economical scalable option for automating Accounts Receivable .
Benefits of a FinTech Lockbox
Reduced Cost
The major objective of the FinTech Lockbox is usually to decreasefees per transaction and provide an Accounts Receivable automation tool to helporganizations to QUICKLY clear cash and facilitate use of your working capital .
Easy payment trail
You can easily track incoming ePayments from one place. Instead of flipping through remittance emails or going to the vendor portal to download payment information . The AR Lockbox gives you a single location to hold ALL your incoming electronic payments meant for swifter cash application .
Removes mail float
Mail float is a term for the time required for a check to go from the payer to the more info payee by means of the postal service . With the rise in B2B payments electronically , mail float is rapidly turning into a thingof the past . The improvement in electronic payments using FinTech Lockboxes with a significant focus on the price reduction and speed in which you clear cash and apply it to your working capital .