5 Lockbox Shortcomings You Should Know About

The introduction of the lockbox, sometime in the middle of the 20th Century, was seen as a major milestone by organizations hoping to speed the acceptance and deposit of check payments from customers. For years, lockboxes offered a more efficient process and a way to remove a lot of the heavy lifting previously associated with manually processing checks.

Much about the lockbox process has not changed. While alternative providers have introduced a host of technology-based solutions that streamline check acceptance and processing, many lockbox providers continue to do business as if it was 1950, not 2016. Have lockbox providers become complacent? Perhaps, but the advent of new technology means that while lockbox providers may have become complacent, companies that employ them don’t have to be.

With technology such as Robotic Process Automation (RPA), companies can now see better returns such as improved match rates and reduced costs. It also means that companies can improve efficiency and focus on more value added tasks.

As companies look to technology to further streamline check acceptance and processing, here are 5 lockbox shortcomings you should know about:

  1. Hit rates are not high enough or economical. Most organizations get a high hit rate of 80% in many cases. Why pay for keying services, often at 1 cent per keystroke, if a significant percentage of payment records still can’t be automatically reconciled to open receivables?
  1. Potential cash application delays. The lockbox provider controls your cash and, in turn, can experience delays depending on their resource levels, The result is an organization’s cash remains unrealized, delaying the cash application process.
  1. Inaccurate data still costs you. Companies are still charged for keying services – even when the lockbox company keys in the wrong data. This usually results in the company employing staff to correct the errors.
  1. Exceptions are not managed efficiently. Companies can still get a high number of exceptions that will have to be resolved, usually with manual effort.
  1. Can’t achieve better audit control. Delivery of image files, in a separate format / attachment to the payment can create delays to audit reconciliation and control down the line.

As outlined, the cost to manage exceptions and to reconcile cash can be time consuming and inefficient – leading to customer dissatisfaction. But, there are alternatives. The world of cash application is changing for the better. Use of RPA technology means that organizations can eliminate all lockbox keying services, improve hit rates, reduce exceptions and, at some point, move away from lockbox services altogether.

Steve Richardson is Commercial Director for Rimilia, provider of intelligent finance solutions, and has engaged with blue chip organizations for over 20 years; leading large teams through process change and efficiency. In his current role, Steve is proud of the innovative and value-added solutions Rimilia offers to customers globally.

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