Home > Money and Finance > Business Banking > Lockbox Services


W. Eric Martin

Guide to Lockbox Services

How to access your money more quickly


Highly
Useful
7.0
out of 10

Add Your Comments
 
 
Email Guide to Lockbox Services to a friend
Save the Guide to Lockbox Services to My Work.com Favorites
Print the Guide to Lockbox Services
link to this page
Save to del.icio.us
digg it!


One of the most common and frustrating problems growing businesses face is tight cash flow. To make funds more readily available, you can use a lockbox service to reduce the "total float" of your cash.

What's "float"? Once you deposit checks you receive from customers, you have to wait for them to clear. As the days pass, you're losing potential interest from those funds. Depending upon your cash reserve, you may even have to delay payments to suppliers until those funds are available. That delay — the sum of the "mail float" and "availability float" — is called the "total float." Some businesses can shrink the delay by using a lockbox, which can help you:

  1. Access needed funds more quickly.
  2. Let someone else process and deposit your checks, freeing up your time.
  3. Earn interest on payments that would otherwise be waiting in the mail.

Action Steps
The best contacts and resources to help you get it done

Know the process — and the lingo


With a lockbox service, customers mail payments directly to a post office box. A bank employee collects those checks — often several times a day — and processes them electronically so that funds are shifted from the customer's account to yours more quickly.

I recommend: See an example of the process at M&T Bank. Customers might ask why the payment appears as an ACH (Automated Clearing House) payment on their bank statement, so be ready to explain it.

Determine whether you are a good lockbox candidate


Restaurants and other businesses that receive all of their revenue at a retail location make poor candidates for lockbox adoption. What's more, you need to look at the size of orders that customers place and pay for by check; organizations that perform lockbox studies typically suggest that if you receive payments of $1,500 or more by mail, you could benefit from such a service.

I recommend: For a bank to complete a lockbox study, you need these four things listed on market researcher PhoenixHecht.com's FAQ: your current deposit location, a sample of payments received (with dollar amount and Zip Code of origin), the length of your typical billing cycle and your cost of capital (how much interest you're losing by not having access to funds). Also see lockbox studies.

Contact banks and other providers for details


Many, if not most, banks provide lockbox services.

I recommend: Lockbox service providers include Bank of America, Center Bank, CitiBank, FirstBank, Independence, North Shore Bank, Ocean National and Scotiabank. Don't forget to contact your own bank and ask for price and benefits as well. Some financial-services firms, such as Merrill Lynch, Emdeon and RemitStream, also provide lockbox services.

Tips & Tactics
Helpful advice for making the most of this Guide

  • Ask about set-up and monthly lockbox fees, and make sure they don't defeat the purpose of signing up for a service in the first place.
  • Decide whether other employees need access to the lockbox or whether you'll monitor all transactions associated with it.
  • If you plan to launch a nationwide advertising campaign or are branching into new geography, consider setting up a lockbox ahead of time.

Featured Vendors

3.15% APY Savings Account
New from E*TRADE Bank. Free One-Click Transfers. Apply Now!
ETRADE.com

ING DIRECT: Business Savings Account Official Site
Earn 3.15% APY for your business. Savings with no fees + no minimums. Grow your money while you grow your business. Apply online.
business.ingdirect.com

Remote Deposit Capture
Cut costs, improve cash flow and net income. Visit RemoteDepositCapture.com, the industry's independent authority on remote deposit capture.
www.RemoteDepositCapture.com

Business Line of Credit as Low as Prime + 0%
Up to $100,000 in capital you can draw on anytime, for any business need. No app, annual or access fees. Must have great credit. Open online today.
SwiftFinancial.com/Business_Loans

Subscribe to

Try our free weekly WhatWorks newsletter, with business how-to advice
& resources from Work.com.

click here to view a sample issue
 Related Resources from Business.com Back to top 
 Recommended Solution Providers Back to top 

Collect payments into a customer commercial account in order to speed deposit processing.

Offers wholesale and retail lockbox services to improve collection float and funds availability.

Managing wholesale or retail inbound fund flow either electronically or by mail.

Speed collections, streamline remittance processing and improve audit trails through lockbox services.

Lockbox services including wholesale, business banking, visual and OCR.

Eliminates in-house remittance processing for U.S. dollar payments you receive from your clients in the U.S.

Converts deposits into working capital and reduces remittance processing.


  CommentsBack to top 

Loading Comments...


Add Your Comments


Email Guide to Lockbox Services to a friend
Save the Guide to Lockbox Services to My Work.com Favorites
Print the Guide to Lockbox Services
link to this page
Save to del.icio.us
digg it!


Is any content on this page inappropriate? To let us know, please click here.

Ads by Google






  Related Guides



Ads by Google







  Related Topics


 


© 2008 Work.com, Inc. All Rights Reserved. Work.com is a property of Business.com.
Help | About Us | Site Map | Terms of Use | Privacy Policy | Community Policy | Community Blog | Advertise on Work.com | Contact Us / Feedback | Work.com Feed