what is a lockbox

A lockbox is a service offered by commercial banks to organizations to simplify the collection and processing of accounts receivable). It is a post-office box (PO box) accessible by the bank, and a company may set up a lockbox service with its bank for receiving customers payments). Businesses using lockbox banking can substantially lower their internal processing costs, speed up collections, and convert their receivables into cash more quickly. Lockbox services work by having a companys customer payments and remittance documents mailed directly to a location accessible by the bank, typically PO boxes or other unified bank mailing addresses. Once customers send their payments to the secure bank lockbox, the bank withdraws and processes these payments, creates an accounting entry, and deposits these funds into the companys bank account. Lockbox services are sometimes called "remittance services" or "remittance processing"). One benefit of the lockbox service to the commercial customer is that it can maintain special mailboxes in different locations around the country, and a customer sends payment to the closest lockbox). Businesses that operate in multiple regions can have separate lockboxes with banks in different regions). A lockbox system is an excellent way to reduce mail float for a larger company that has a national or international customer base.