March 18th, 2016

Overcoming Key Lockbox Processing Challenges

Lockbox banking is a great cash flow management offering for businesses that receive a large quantity of payments from numerous customers. Lockbox services can effectively accelerate the collection and deposit of check payments sent via the postal service with accompanying remittances.

Undoubtedly, lockbox banking ensures that payments make their way more swiftly into company accounts. However, it is the processing of these lockbox payments that can cause a real headache for AR and Cash Application teams. The amount, entry and transaction balancing tasks required for processing lockbox files can present a number of key challenges.

Banking Fees

Banks never do anything for free and paying for a lockbox service is expensive. The fees skyrocket when you have your bank extract all the payment information from your customer remittance files. Some banks charge 1-3c per character which sounds cheap but can add up to $50,000+ per annum on high volume lockbox accounts. These are the fees in relation to receiving a BAI2 file. When you want to see the images for this same file for extra detail there are more costs involved.

Manual Labour Hours

Bank lockbox files must be manually downloaded from the banking software. Even if your IT team automates BAI2 processing there is lots of work involved and often the image files are left behind.

Individual customer remittances need to be manually allocated in the ERP System. Remittance processing is an especially difficult and time-consuming task if customer remittances are received in various formats. There can also be a significant amount of time spent gathering missing electronic payments remittance information.

Customer Deductions Investigations

Being able to generate deductions with the proper deduction codes is a labour intensive process and one that is almost always missed in Cash Application projects. Cash application and customer deductions are intertwined processes. The last thing companies need is to triple handle deductions investigations and miss relevant information.

Risk of Inaccuracy

If lockbox files contain numerous batches of data from multiple bank accounts, therein lies a serious risk of inaccurate lockbox processing. Reviewing and validating this level of data from such a variety of sources is quite challenging.

Trying to identify crucial data errors is an even more laborious task. Even if an error is identified, trying to resolve the issue can take endless hours. Inaccurate lockbox processing can prove very costly for any business.

Lack of Control & Transparency

Finance teams struggle to have a clear picture of outstanding items therefore resolution of lockbox issues can be quite slow. Cash management personnel will find great difficulty in identifying which invoices are still due for payment or need to be resolved.

The interim period where lockbox payments have come through but remittance data has not been allocated in the ERP may last days or even weeks. During this time, there is no clear window into the status of customer payments.

Disjointed Bank & ERP relationship

The lockbox banking facility offered by your bank is an excellent service and your ERP is a powerful company asset. However there is a very disjointed relationship between banks and your ERP.

You’ll likely find that your company is subject to high bank charges for payments in different currencies. Lockbox files from different bank accounts, currencies and business units will each land separately in your ERP.

Some organisations may find that there simply isn’t any integration at all offered by your bank for your ERP. This means lockbox payments may have to be manually input into the ERP. This disjointed relationship results in a costly and time-consuming lockbox process.

The solution?

Lockbox banking is a great service but it can only have a significant impact if lockbox processing can be streamlined. Lockbox automation software provides the essential missing link between your bank(s) and your ERP system. The ability to automate lockbox processing can have a monumental impact for your business.

Intelligent, seamless integration with all major banks
With Cashbook’s lockbox software, we scan check and remittance images. We then link this data with the bank’s BAI2 file or create our own OCR data file. We create image recognition by customer and store these image patterns. Our intelligent system learns over time how to handle each type of remittance received.

Reduce manual labour hours
Cashbook lockbox software ensures mass validation of numerical values and letters. This automated processing greatly reduces manual labour and increases process speed. Separation of payments and remittances can be handled and automatically linked together. There’s even the capability to add Email OCR extraction.

Increased financial control & transparency
Users can use lockbox software for storing check images and remittances for as long as they need. You retain full control and can review all details before posting the cash to AR and GL. Detailed control reports are easily accessible and the metrics can help to facilitate work assignments.

Decreased margin for error
The confidence percentages on data validation ensures mass review of OCR extracts before importing to Cashbook lockbox software. This greatly decreases the margin for error and increases transparency. Matching algorithms based on a combination of invoice number and sales order number ensure accurate, automated file processing.

Let’s talk…

Are you ready to speed up lockbox processing, increase financial control, reduce costs and move staff to higher value work? Discover how you can achieve unprecedented levels of lockbox automation with your current ERP. Request a demo of our intelligent lockbox software.

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