Lock box

In banking, a lock box is a service offered by commercial banks to organizations that simplifies collection and processing of account receivables by having those organizations' customers' payments mailed directly to a location accessible by the bank.

In general, a lockbox is a post-office box (PO box) that is accessible by a bank. A company may set up a lockbox service with its bank for receiving customers' payments. The company's customers send their payments to the PO box. Then the bank collects and processes these payments directly and deposits them to the company's account. Typical costs are several cents per transaction to as high as one dollar or more.

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. The company then authorizes a bank to check these mailboxes as often as is reasonable, given the number of payments that will be received. Because the bank is making the collection, the funds that have been received are immediately deposited into the company's account without first being processed by the company's accounting system, thereby speeding up cash collection.

Lockbox services are generally divided into wholesale and retail.

Retail lockboxes are for companies with high volumes of consumer-oriented payments such as utility payments, loan payments, etc., and these remittances often include a standardized "payment coupon".

Wholesale lockboxes are for corporate-to-corporate payments and tend to be higher dollar amounts than retail lockbox transactions. These transactions usually do not include a standardized payment coupon and require more manual effort for the bank to process.

With the advent of cheque truncation, it has become common to "capture" images of the checks and associated documentation (payment coupons, for example) into a digital format for use in computer systems (i.e., TIFF, JPEG or PDF files). These files can then undergo OCR and data validation when character confidence is low and then further specialized processing may take place. Banks often use specialized mail processing and document scanner equipment that can scan hundreds, or thousands, of checks per minute.

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