Many companies use lockboxes or lockbox networks to accelerate deposit
of payments from customers by reducing mail float, as well as processing
float. A lockbox network is a mechanism that allows a financial entity
such as a bank to collect and deposit payments on behalf of its customer,
the creditor. The primary goal of lockbox systems is to accelerate
the availability of funds to the creditor. A lockbox study can help
a creditor company to decide how many lockbox locations it needs to
have and where those lockboxes should be located. As a general rule,
a company should have a lockbox study performed if or when:
It currently does not use any lockbox system.
The company sells nationally but has only one lockbox location.
The creditor company is using a multiple bank network rather than
a network operated by a single bank.
The current lockbox network locations were selected without the
benefit of a formal lockbox study.
It has been at least two years since the last formal study was
The creditorís customer base has changed significantly
over the last two years.
The creditor opens a large number of new accounts each year, or
has recently completed a merger, an acquisition or a divestiture.
The company has recently expanded into new geographic markets
The lockbox bank has been acquired and/or has closed one or more
of the lockbox locations used by the creditor company.
Clearly, in some cases the number and location of lockboxes in the
existing network is adequate. In this scenario, a lockbox study is
likely to recommend changes involving which customers are asked to
remit to which lockbox. A study might recommend a more comprehensive
change in which lockboxes are added or deleted from the network, and
customers are reassigned based on the location from which customers
currently send payments. In certain cases, a complete overhaul is required.
It is conceivable that all of the lockboxes the current network will
be closed, and an entirely new configuration will be established. In
this scenario, every customer would be asked to remit to a new lockbox
Sometimes, the most difficult task for the credit department involves
convincing customers to remit payment to the companyís lockbox.
Why? A charitable explanation would be that the customerís accounts
payable department is too busy to change the remittance address in
their computer system. Another possibility is that customers are reluctant
to remit payments to lockboxes because they realize that making this
change will reduce payment float.