Lockbox
A bank service that receives customer cheque payments at a dedicated address, deposits them and sends the business the payment details.
In short
- Cheques go straight to the bank instead of passing through the office.
- The bank sends images and data so payments can be applied to invoices.
- It matters less as more customers pay electronically.
A lockbox is a collection service offered by banks. Customers mail their payments to a postal address managed by the bank rather than to the business. The bank opens the mail, deposits the cheques and sends the business a file with images of the cheques and remittance slips and the key data, such as amount, payer and invoice numbers.
Why businesses use it
- Speed: cheques are deposited the day they arrive, rather than after sitting in an office mail tray.
- Security: fewer people handle cheques, reducing the risk of loss or theft.
- Data: payment details arrive in a structured file that can feed cash application.
Wholesale and retail lockbox
A wholesale lockbox handles fewer, larger business-to-business payments, often with complex remittances covering many invoices. A retail lockbox handles many small consumer payments with standard payment stubs, such as utility or insurance bills.
A declining service
Cheques are a shrinking share of business payments in Canada and the US as electronic funds transfers and card payments grow. Many businesses still keep a lockbox for customers who pay by cheque, while pushing new customers toward electronic payment, which arrives faster and with cleaner data.
Worked example
A day's lockbox file
A distributor's bank lockbox receives 64 cheques on Tuesday totalling $213,400. By noon, the funds are deposited and the bank sends a file with each cheque's amount, payer and the invoice numbers read from the stubs. The AR team's software matches 58 of them automatically; six without stubs are applied by hand from the cheque images.