Do you know the benefits of accounts receivable automation? Conventionally, a bank lockbox has been used by organization Accounts Receivable departments to increase efficiency.
Lockboxes have been around for decades and much of the conventional bank lockbox's life has been utilized for processing payment information associated with payments made by check. Big provided this service to improve effectiveness and flow of business transactions simplifying the accounts receivables collection method.
Clients basically use 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 helps with lowering the company’s Days Sales Outstanding (DSO). Banks get the paper check, process it along with the remittance data and send the information back to their customer. Because banks are processing checks and remittance this decreases the customers A/R workforce and increases their efficiency. The cost of the bank lockbox is typically a monthly fee along with a per line remittance data processing fee. To process a huge number of checks over time can be expensive with a lockbox.
Today, we see a big change with Accounts Payable Departments paying electronically. This change to ePayments has revolutionized the FinTech business with {solutions| designed with the goal of decreasing business costs of processing incoming payments.
Weaknesses of a Traditional Bank Lockbox
The lockbox is usually rather costly . Banks usuallyearn a monthly fee along with a per line fee related toprocessing payment remittance detail .
Lockboxes can contain security concerns . The standard bank lockbox still takes a decent measure of manual re-keying information . With the majority of manual data entry attendance being entry level-administrative personnel who are a novice to the financial institution or an outsourced contractor . The information from the lockbox provides all vital components to produce a fraudulent check .
Lockboxes don’t tie into your accounting program . Bank lockboxes process the payments and remittance information and thensend you the information . Your personnel still must enter that data into your ERP to clear the cash .
Commercial Bank Lockboxes Are Creating issues for your Customers' AP Department . Businesses are modernizing their AP Department to eliminate manual task and deciding to pay their customers electronically via ACH , Credit Card or vCard . These preferred methods of ePayment are generating an increase in email remittance . FinTech solution businesses have bridged the gap to aidthose organizations in a cost efficient scalable solution for automating Accounts Receivable .
Pros of a FinTech Lockbox
Reduced Cost
The primary objective of the FinTech Lockbox is usually to reducepricing per transaction and provide an Accounts Receivable automation application to more info permitorganizations to QUICKLY clear cash and facilitate access to your working capital .
Easy payment trail
It is easy to track incoming ePayments in one location. Rather than flipping through remittance emails or heading to the vendor portal to download payment information . The AR Lockbox gives you a single place to hold All of your incoming electronic payments produced for faster cash application .
Removes mail float
Mail float is a term for the time required for a check to travel from the payer to the payee through the postal service . With the increase in B2B payments electronically , mail float is swiftly becoming a thingof the past . The increase in electronic payments embracing FinTech Lockboxes with a primary focus on the price reduction and speed in which you clear cash and apply it to your working capital . more info