For decades, businesses have relied on bank lockbox services to accelerate collections and reduce the administrative burden of processing customer checks. While the fundamental concept remains the same, today’s lockbox solutions can go beyond by automating key accounts receivable processes.
With so many solutions available, the key question is: Which service can best reduce employee workload, improve cash flow and enhance payment controls?
Automated clearing house (ACH), credit card and instant-payment services can also provide efficient collections.
Traditional vs. contemporary
With a traditional lockbox arrangement, customers send payments to a designated address controlled by a business’s bank or another service provider. The provider collects payments, deposits checks and sends payment information electronically to the business.
Contemporary systems can capture information from checks and accompanying remittance documents, including customer and invoice numbers. That data generally is transmitted to your accounting or enterprise resource planning system to help automate the process of matching payments with outstanding invoices. The result can be faster processing and less manual work for your workers. Instead of opening envelopes, recording payments and depositing checks, your staff can focus on exceptions and other higher-value tasks.
Don’t overlook fraud risk
Security, particularly of paper checks, is another factor that favors lockbox services. According to the Association for Financial Professionals’ 2025 Payments Fraud and Control Survey, 63% of organizations experienced attempted or actual check fraud the previous year. Although lockboxes do not eliminate check fraud, moving receipt and check processing away from your workplace can reduce payment handling and allow for more controlled procedures.
ACH and other electronic payment methods typically offer lower processing costs and also eliminate some of the fraud risks associated with paper checks. Instant payments are another option. Participating financial institutions can provide payments that settle within seconds, 24 hours a day, seven days a week.
Checking the math
Lockbox pricing varies by financial institution and service level and may include recurring and transaction-based charges. To determine whether the service makes financial sense, compare those fees with what you are spending internally to process payments. Weigh factors such as:
- The number of paper checks you receive,
- Time spent processing and reconciling payments,
- How quickly payments are currently deposited,
- The value of accelerating access to cash,
- Ease of integration with your accounting system, and
- Fraud prevention benefits.
If your business receives a large volume of checks, a lockbox may make sense. But if your volume is relatively low, you may reap greater benefits by encouraging customers to use electronic payment methods.
Discuss your options
Connect with your bank to learn more about available lockbox and electronic receivables services, including their associated costs. You can also reach out to your Rudler, PSC advisor today for guidance. We can help assess your current payment-processing expenses, identify potential improvements in cash flow and payment controls, and determine whether a lockbox or another receivables solution is the right fit for your business.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Kacie Hamlett, Senior Accountant and Matt Topmiller, CPA.
If you would like to discuss your particular situation, contact Kacie or Matt at 859-331-1717.
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