Are you familiar with the benefits of accounts receivable automation? Traditionally, 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 conventional bank lockbox's lifespan has been used for capturing payment data associated with payments made by check. Mainstream offered this benefit to improve effectiveness and flow of company transactions streamlining the accounts receivables collection method.
Clients generally leverage the bank lockbox to receive check payments in one consistent location.
Bank lockboxes are strategically placed in a central location to decrease mail delivery time, which also assists with lowering the business’ 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 huge number of checks over time can be pricey with a lockbox.
Today, we see a big shift 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.
Disadvantages of a Traditional Bank Lockbox
The lockbox can be fairly costly . Banks typicallyacquire a monthly fee along with a per line fee related tohandling payment remittance detail .
Lockboxes may contain security issues . 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 workers who are a novice to the financial institution or an outsourced service provider . The data from the lockbox provides all required elements to generate a fraudulent check .
Lockboxes don’t tie into your accounting program . Bank lockboxes process your payments and remittance information and thensend you the information . Your team still must input that data into your ERP to clear the cash .
Financial Institution Lockboxes Are Creating a Problem for your Customers' AP Department . Businesses are modernizing their AP Department to eradicate manual task and deciding to pay their customers electronically via ACH , Credit Card or vCard . These desired methods of ePayment are generating an increase in email remittance . FinTech solution businesses have bridged the gap to supportthose businesses in a cost effective scalable alternative for automating Accounts Receivable .
Rewards of a FinTech Lockbox
Reduction Cost
The primary objective of the FinTech Lockbox will be to lowercost per transaction and produce an Accounts Receivable automation tool to helpbusinesses to QUICKLY clear cash and improve access to your working capital .
Trouble-free payment trail
You can easily track incoming ePayments from one place. Rather than flipping through remittance emails or going to the vendor portal to download and read payment information . The AR Lockbox gives you one destination to house All of your incoming electronic payments made 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 payee from the postal service . With the rise in B2B payments electronically , mail float is quickly turning into a thingof more info the past . The improvement in electronic payments using FinTech Lockboxes with a primary focus on the rate reduction and speed at which you clear cash and apply it to your working capital .