Lockboxes can be relatively costly.

The banks typically earn a fixed setup and continuous

monthly fee for each lockbox. They also charge a service / transaction fee for each payment
processed. As with many banking pricing models, their rate sheets are usually complicated
and hard to read. Typical lockbox candidates are processing many thousands of checks a
month so these minute charges that you see on the front end of signing up for the service,
end up adding up quickly. This is because while the bank maybe more efficient than your
own back office, they still are relying on a fair degree of manual effort and labor costs.

Lockboxes can have security concerns. Because lockboxes still require tedious manual
processing, many of the staff at banks that are responsible for the data entry are new to the
bank or are offshore contractors. The information from a lockbox payment provides all of
the necessary components needed to counterfeit a check. And the volume of lockbox
payments is usually so high that it becomes relatively easy to slip a fraudulent check
amongst many good payments. With these dangerous combinations, a criminal can exploit
both vulnerable process and personnel...not to mention that with any manual task, comes
margin for error - and when it comes to getting paid, a grantees leniency for oversight is
minimal; fraud or even a slight blunder has potential to tarnish business to business
relationships.

Lockboxes are still slow. While it's true a lockbox can be faster than a check sent to directly
to your organization, lockboxes are not a digital or electronic process. This means that while
they may lesson the time that a check is in the mail, they don't eliminate the time a check is
the mail. Further because the check still must be deposited and processed (albeit by a bank
employee), the funds are not available in real-time.

Lockboxes don't tie into your system. While Lockbox reports can certainly be sent to your
finance team, and your ERP system is aware of the deposits, an automatic matching of the
customer information at the time of payment to the information stored in your CRM & ERP
systems is unlikely to magically happen. Instead back-office teams sill likely need to reconcile
the deposit to the information in their system of record.

Lockboxes don't account for other payment types. Most business accept forms of payments
other than checks. Lockbox services do not directly integrate with payment methods such as
cards, ACH, EDI, or newer Internet based digital payment rails such as eCheck. This adds
complexity in a receivable process running different systems for different payment methods.

Lockboxes are becoming inconvenient for your customer's AP department. Many AP

departments are modernizing their invoice & payment process to reduce the number of
physical checks they have to manually cut & process. With commercial spend cards,
payment virtual cards, ACH, EDI & direct bank transfer all rapidly growing as preferred
methods for the AP department to improve efficiency, business process and security,
lockboxes ability to completely serve the customers payable team is fast on the decline,
making the Lockbox Service an antiquated one.
Electronic Lockbox Payments

An electronic lockbox service replaces the physical address of a traditional lockbox with a
digital web address and replaces paper checks with electronic forms of payments such as
eChecks, ACH, debit cards, credit cards and electronic bank transfers. These electronic
lockboxes are a natural evolution of physical lockboxes and aim to further improve
receivables in speed, security, efficiency and cost. We explore more about how electronic
lockboxes work in our part 2 of our Lockbox Guide: