Do you know the advantages of accounts receivable automation? Traditionally, a bank lockbox has been used by business Accounts Receivable departments to increase efficiency.
Lockboxes have been around for decades and much of the traditional bank lockbox's lifespan has been utilized for capturing payment information associated with payments made by check. Mainstream provided this amenity to improve effectiveness and flow of company transactions simplifying the accounts receivables collection process.
Clients generally use the bank lockbox to receive check payments in one consistent location.
Bank lockboxes are purposefully placed in a central location to reduce mail delivery time, which also assists with lowering the company’s Days Sales Outstanding (DSO). Banks get 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 customers A/R workforce and increases their productivity. The cost of the bank lockbox is typically a monthly cost along with a per line remittance data processing fee. To process a huge amount of checks over time can be pricey with a lockbox.
Today, we see a huge shift with Accounts Payable Departments paying electronically. This shift to ePayments has elevated the FinTech industry with {solutions| designed with the goal of decreasing business costs of processing incoming payments.
Pitfalls of a Traditional Bank Lockbox
The lockbox can be fairly expensive . Banks typicallyearn a monthly fee in addition to a per line fee related toprocessing payment remittance detail .
Lockboxes can contain security concerns . The traditional bank lockbox still requires a fair measure of manual re-keying information . With the majority of manual data entry attendance being entry level-administrative employees who are a novice to the financial institution or an outsourced service provider . The data from the lockbox can provide all necessary elements to make a fraudulent check .
Lockboxes don’t connect into your accounting program . Bank lockboxes process your payments and remittance data thenforward you the information . Your organization still must input that data into your ERP to clear the cash .
Traditional Bank Lockboxes Are Causing difficulty for your Customers' AP Department . Corporations are modernizing their get more info AP Department to remove manual process and preferring to pay their clients electronically via ACH , Credit Card or vCard . These desired methods of ePayment are creating an increase in email remittance . FinTech solution businesses have bridged the gap to servethose firms in a cost efficient scalable solution for automating Accounts Receivable .
Benefits of a FinTech Lockbox
Reduced Cost
The primary objective of the FinTech Lockbox would be to lowerfees per transaction and provide an Accounts Receivable automation tool to allowbusinesses to rapidly clear cash and improve use of your working capital .
Easy payment trail
It is easy to track incoming ePayments in one place. Instead of flipping through remittance emails or going to the vendor portal to download and read payment data . The AR Lockbox gives you a single place to house All of your incoming electronic payments made for speedier cash application .
Eliminates mail float
Mail float is a term for the time required for a check to go from the payer to the payee via the postal service . With the increase in B2B payments electronically , mail float is swiftly turning into a productof the past . The improvement in electronic payments choosing FinTech Lockboxes with an essential focus on the fee reduction and speed in which you clear cash and apply it to your working capital .