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The Lockbox: Banking Technology Revisited

A bulk of business payments rely on checks while consumers shift to electronic transaction models. Here is where the Lockbox Technology can help.

Technology has made inroads, yet checks remain the dominant payment method. While businesses and consumers increasingly use automated clearing house (ACH) and credit cards to pay companies, the bulk of business payments—especially for organizations with revenues ranging from $10 to $50 million—still rely on checks.


There's a measure of familiarity with checks, but the need for clearing speed and accuracy to match emerging electronic transaction models is growing. The result is an increasing reliance on lockbox solutions; what served in the 1940s as a way for banks to ensure creditor payment is evolving into a highly automated means for expedited cash flow.



Lockboxes Evolved

Think of a lockbox as a post office box that only authorized bank representatives can access. Instead of driving to the bank to deposit checks or manually entering payment data, today's accounting employees instead can focus their attention on billing or customer service, while the bank handles all data processing. Checks are fed through a high-speed scanner to capture image data, eliminating the possibility of human error. The images are then made available to company staff for review, and in many cases checks are given same-day collected credit.


"Any company that has $10 million in revenue and greater is a good candidate for lockbox services because the bank can automate processing of accounts receivable and pass accounts receivables posting data back to the company quickly and with a traceable record," says Katrina Michalk, Cadence Bank Executive Vice President and Treasury Management Executive.


The greatest advantage of evolved lockboxes, however, is customization. "Cadence Bank customizes every output file regardless of the client's size," Michalk notes. "In one client's case they needed us to capture 36 fields of data with each payment. Instead of key-stroking the information, we used the client's billing file to make the process more efficient. We can identify billing discounts, 'short pays' and more." In addition, forward-thinking banks are creating other ways to minimize company effort. For example, Cadence is developing a way to automatically notify clients in the case of an non-sufficient funds issue. This eliminates the need to create a manual charge back entry after payment processing.



Proof Positive

Of course, efficiency is only one aspect of lockbox transactions. Perhaps more critical for midsize businesses is comprehensive fraud detection—and control over debits from company accounts.


To combat potential fraud, Cadence offers its Positive Pay service, which matches issue information to each paid check. When information fails to match the check, the check is returned to the client for further investigation. Using Positive Pay, companies can review all ACH debits posted to their accounts, and decide to pay or return the items as necessary. For even greater control ACH Positive Pay filters may be applied, which let clients specify which ACH originators to trust and what amounts to expect. Any debits outside the set criteria will be sent to a secure online portal for review.


Lockboxes have come a long way. Improvements in image scanning and automated processing mean faster payment turnaround with less client effort, while oversight has evolved to give companies pinpoint control over any incoming debits. Ultimately, Cadence hopes to give clients greater ownership and understanding of their data by embracing a "we" attitude. "It's all about quality," says Michalk. "When we provide good data with high quality imaging to our clients, we are giving them valuable information in a format they can use easily. That's a quality experience."


Contact your Cadence Bank Treasury Management Officers to learn more.



This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

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