Fresh Thinking: Insights + Resources

Information Created to Address Your Business’s Top Challenges and Concerns. To Spark Transformative Thinking and Problem Solving.
December132013

Lockbox Services: A Better Way to Pay

payables lockbox

Consumers love online bill payments. Why? Security, speed and synchronicity. Payables Lockbox services offer the same advantages to businesses—those with over $10 million in revenue and more than 100 payments per month are prime candidates for reducing A/P overhead through judicious lockbox use. Simply put, companies need a better way to pay; it's time to innovate the invoice.

The Payables Challenge

Companies face two distinct problems when it comes to paying vendors. First is complexity: Paper invoices come in all shapes and sizes, and the way vendors record costs for materials, labor or service isn't standardized. Next is consistency: Paper-based processing can take anywhere from two to six weeks to complete, leaving vendors unsure of when exactly they'll be paid, and companies uncertain about exactly when funds will be removed from their accounts.

Complex, inconsistent processes come with a high cost, since businesses must pay for not just data entry, but diligent oversight. This means multiple check points in the A/P process where invoices are received, extracted, sorted and coded. Once entered, payments must be approved, sent and then stored—and what if a dispute arises? Sorting through mountains of paper means even more man-hours spent, along with the possibility of missed payment deadlines. In an online world ruled by instant communication, snails-pace payments can seriously damage a company's reputation.

Unlocking Potential

Payables Lockbox solutions give companies distinct advantages over paper-based processes, with added failsafes to account for large fund volumes. Instead of paper, email or fax invoices being processed by a company directly, they are instead re-routed to a bank's lockbox services. In the case of physical invoices, they are sent to a dedicated P.O. box for multiple pickups daily. Using state-of-the-art scanning technology, each invoice is data mined for information such as payment amount, vendor, due date and business unit. Next, this information is posted to a secure online system accessible only to authorized personnel.

Companies can then determine how invoices will be approved. One or multiple employees may be designated as approval authorities, or companies may choose to set up automatic payments for consistent, month-to-month expenses. In addition, email alerts are sent as required to notify users of authorization requests or due dates, and all invoice data is easily searchable in the event of a dispute or request for an audit. The result? Employees don't have to spend time on as much data entry or chasing down missing paper invoices; automated, secure electronic lockboxes eliminate a vast percentage of the in-house coding needed.

A Step Further

While automatic invoice payment of both paper invoices and ACH transactions offer substantial benefits for a company's bottom line, managers are understandably concerned about the possibility for loss.

Fortunately, leading-edge institutions such as Cadence Bank have developed a way to help combat this concern: ACH Positive Pay. Instead of manually reviewing and approving each ACH transaction, companies using Positive Pay create filters, a set of rules-based criteria such as requesting vendor or total invoice amount. If Positive Pay criteria are met, the debit is paid. If any debit items fall outside the filter parameters, the debit items will be available to authorized personnel through the online portal for the payment decision, and there will be a window of time in the morning to make the decision whether to pay or return them. This system allows granular control over the payables process, reducing fraud risk without impacting workflow.

Companies tired of the complexity and inconsistency that come with paper invoicing now have a choice: centralized payment solutions using a payables lockbox, backed by the security of a trusted financial institution. The ideal lockbox provider is local, but with a global focus, and uses state-of-the-art technology to deliver timely, customized reporting along with reliable invoice storage and data protection. There's better way to pay: It's time to go paperless.

 

You might also be interested in:

 The 411 on Lockboxes - Learn more about how Lockbox can help expedite cash flow, enhance security and build efficiency, or contact a Cadence Bank Treasury Management specialist.