LOCK BOX PROCESSING IN SAP
- Include details for Cross- Company processing
A company can create accounts called 'lockbox' at its bank (or banks) that act as payment collectionaccounts for customer payments. The company then informs their customers that all open item paymentsfor their accounts must be submitted to one of the established bank lockbox accounts. The bank collectsthese payments along with the customers' remittance information that indicates what open items thecustomer payments intend to clear. Data entry clerks at the bank manually enter the information into anelectronic file for transmission to the company to which the lockbox account belongs. These files aretypically transferred nightly to the various lockbox owners (companies). The files adhere to one of twostandard banking industry transmission formats: BAI, BAI2 (Bank Administration Institute).
Advantages of Lockbox
Following are some of the advantages of using the lockbox:Manual Handling of checks can be avoided Checks can be processed in time. Easy reconciliation ClearingErrors can be avoided
Difference between BAI and BAI2
BAI and BAI2 formats differ in their level of information detail. BAI does not separate out the incomingcheck line items by invoice subtotal reference. Instead, one check total amount simply has all invoiceslisted underneath it. Thus, in BAI format files, the entire check amount must match perfectly (or withinconfigured payment difference tolerances) the total amount for all invoices listed. Otherwise, the entirecheck will enter into SAP as: an "On account" posting (if the payment and invoice totals don't match), or An "Unprocessed" posting (if no customer account and documents could be identified from thetransmission). In these scenarios, your Accounts Receivable cash application clerks will have to performmanual application to clear payments against open items on the proper accounts.Conversely, BAI2 splits the check total into separate invoice references and associated payment amounts.Thus, within a large batch, BAI2 format files will allow a "Partially applied" status in which some identifiablepayments within the check total will be matched and cleared, others will land on account. As a result, your 'hit rate' percentage of payment-invoice matching from each transmission is likely to be higher when usingBAI2 rather than BAI formats.