Are you aware of the advantages of accounts receivable automation? Conventionally, a bank lockbox has been used by business Accounts Receivable departments to increase efficiency.
Lockboxes have been around for many years and much of the traditional bank lockbox's lifespan has been used for processing payment information associated with payments made by check. Big offered this amenity to improve effectiveness and flow of business transactions simplifying the accounts receivables collection method.
Customers basically use the bank lockbox to receive check payments in one consistent location.
Bank lockboxes are purposefully 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 productivity. The price of the bank lockbox is usually a monthly fee along with a per line remittance data processing cost. To process a large amount 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 can be relatively costly . Banks usuallyearn a monthly rate as well as a per line fee associated withhandling payment remittance detail .
Lockboxes may contain security concerns . The standard bank lockbox still takes a fair amount 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 create a fraudulent check .
Lockboxes don’t connect into your accounting system . Bank lockboxes process the payments and remittance data thensend you the information . Your team still must enter that information into your ERP to clear the cash .
Traditional Bank Lockboxes Are Causing difficulty for your check here Customers' AP Department . Organizations are modernizing their AP Department to get rid of manual task and deciding to pay their customers electronically via ACH , Credit Card or vCard . These popular methods of ePayment are creating an increase in email remittance . FinTech solution businesses have bridged the gap to aidthose organizations in a cost effective scalable alternative for automating Accounts Receivable .
Rewards of a FinTech Lockbox
Reduced Cost
The major goal of the FinTech Lockbox would be to lowerpricing per transaction and provide an Accounts Receivable automation application to helpcompanies to QUICKLY clear cash and improve access to your working capital .
Simple payment trail
It is easy to track incoming ePayments from one location. Instead of flipping through remittance emails or heading to the vendor portal to download and read payment information . The AR Lockbox provides you with a single place to house ALL your incoming electronic payments created for more rapid cash application .
Removes mail float
Mail float is a term for the time needed for a check to travel from the payer to the payee by way of the postal service . With the increase in B2B payments electronically , mail float is swiftly turning into a productof the past . The rise in electronic payments using FinTech Lockboxes with a significant focus on the fee reduction and speed in which you clear cash and apply it to your working capital .