6 Reasons to Consider a Bank Lockbox for Collecting Payments

Learn how a lockbox system can streamline your payment collections

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A lockbox service at a bank grants you access to one or more lockboxes, which are post office boxes that the bank can set up in various locations around the country in order for your business to receive checks or payments from customers.

Lockbox systems help businesses collect payments more efficiently. Instead of handling incoming payments yourself (and waiting for those payments to move through the mail), payments go to a lockbox, and the bank can collect those payments, capture information about the transaction for your record-keeping purposes, and even put the money into your business account. Identifying what bank lockbox systems offer can help you determine whether it's a worthwhile addition to your accounts receivable system.

Multiple Types of Bank Lockboxes

You'll have your pick of three types of lockbox services:

  • Retail: This bank lockbox option is used by organizations that receive a large volume of relatively small payments. For example, a business that has customers around the nation (such as a phone company) might set up lockboxes in several areas to prevent payments from spending several days in the mail. These payments are often imaged and the data is captured with a standard computer-readable payment coupon. In many cases, “online” bill payments from your consumer bank account end up in these lockboxes.
  • Wholesale: Used for larger, less-frequent payments, such as those between business partners (suppliers, for example). Because these payments can be large, it might be worth getting the money in the bank faster. However, these receivables are usually not as simple as a check with a standardized payment coupon; it requires more labor and expertise to process data through specialized technology, such as optical character recognition (OCR) and page-scanning technology.
  • Other: This is a custom bank lockbox solution that you can have set up for any purpose at certain banks. If receivables outside of those detailed above needs to go through the mail, the bank can often design a creative, tailored solution.

Fast Payment

Ordinarily, when customers or partners send your business money, you need to deposit those funds. That means waiting until the payment arrives, sending somebody to the bank with the check (or having an employee convert the payment to an electronic payment), and waiting for the funds to clear in your account.

When you have a high volume of receivables, it takes significant resources to handle those payments. What’s more, waiting for paper checks to move through the postal system and find their way across the country means you have to wait at least one to three days before you get paid.

With a bank lockbox system, you get paid more quickly. You can have post office boxes set up in selected geographic areas that will minimize mail time from customers and will often reduce the overall collections processing time by anywhere from a few hours to a few days.

Multiple Deliveries Per Day

With your local mail service, you might only get one delivery per day. That results in extra “float” time, which refers to how long checks spend in the postal system. Especially when the dollar amounts are large, waiting just one extra business day can be costly.

Depending on the lockbox system you choose, mail may be delivered multiple times at high-volume mail centers, which also helps you collect more quickly.

Outsourcing Receivables

Without a lockbox, one or more of your own associates must open mail and capture transaction information, which can take them away from revenue-generating activities.

In contrast, an employee of your bank lockbox service will open mail, key in any information from payments, and sometimes provide additional services. The promise from vendors is that you get to put your resources toward your core business while letting them handle payment processing. 


Since you don’t have employees at those locations—the bank does—be prepared to pay a monthly fee for the mailbox and a per-payment transaction fee for someone to process those payments for you.

Additional Tools

Some lockbox systems offer additional features that keep things moving smoothly. For example, your bank might keep a record of account numbers from customer checks so that they can identify how to credit a payment if your customer forgets to include a payment coupon (or the customer doesn’t provide his account number). For any oddball items or errors, the bank might set up an online portal where you can view these issues and resolve them.

Electronic Options

Many banks will convert check payments to electronic payments for you (when allowed). Others offer electronic lockboxes, whereby check payments get aggregated and then sent directly to the business bank account as an ACH deposit. This option may allow your business to get paid two to three days sooner than with paper checks.

New alternatives to lockboxes offered by banks come from fintech startups such as LiquidX, Tiplalti, and C2FO. These are just a few companies that are working to solve problems related to the float time, time lag, paper load, and errors in B2B payments.

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  2. BBVA USA. "Is Lockbox Banking Right for My Business?"

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  4. United States Postal Service. "Mail & Shipping Services."

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  6. NASDAQ. "Glossary of Stock Market Terms."

  7. Regions Bank. "Regions Image Lockbox Online," Page 18.

  8. First Merchants Bank. "Lockbox."

  9. BNC National Bank. "Lockbox Services."

  10. Cadence Bank. "Electronic Lockbox Service Streamlines Consumer Payment."

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