I spent the last few days at the Association of Financial Professionals annual conference and I continue to be impressed with the ever evolving technology around payments and collections. I am most interested in the changes around the collection of receivables – specifically lockbox and/or remote deposit capture processes that lead to a significant reduction of time spent posting payments. Lockboxes are nothing new and have been around for decades. Businesses use lockboxes to transfer the tasks of physically collecting payments over to their bank. The payments are sent to a post office box address to be picked up and processed by the bank. Of course the business name is on the remittance document and your client may not know their payment is being sent elsewhere. Banks then open those envelopes, image everything in the envelope, then deposit the check. Images are made available to the business as soon as they are processed so the business can set about to post those payments. But….the biggest advantage to using a lockbox is when the bank can electronically capture information about the payment and then forward that information on to the business for further upload into their accounts receivable system for automated posting. The bank is able to capture that information either by manually keying data or scanning OCR documents.
Oftentimes though, some payments will still go to the business which will need manual posting. The business could opt instead to re-send those payments on to the post office box for the bank to pick up and process but that results in a delay in getting fund deposited. Or the business could use remote deposit capture to scan the check (just the check, no other documents) from their office (see earlier post It Sort of Looks Like A Check) to get the item deposited, then turn around and manually post the payment.
I am excited about the new technology I saw this week called virtual lockbox. It works using a small desktop scanner which image captures not only checks but also large and small documents (practically any type of remittance document), credit card vouchers, envelopes and correspondence. At the same time, it is capturing the fields of data needed to create a posting file for upload into your system. So think about it – you can capture the same information your lockbox bank is capturing only you are doing it in your office. This would be perfect for those payments that inevitably come into your office as opposed to your p.o. box. The bank can then take the data you have captured and integrate it with the information they have captured, and give you one posting file.
This system is a great compliment to an existing lockbox or it might make sense for you to do this yourself without using a bank’s lockbox. I would not recommend it as a replacement for any lockbox of significant volume. This is a major departure from the traditional lockbox and it may begin to erode some of the bank’s market share from this service. But for smaller lockbox users, it is worth looking into.