Font Size:

Growing Business

5 Questions You Should Ask About Lockbox Services

Posted by Jason Olson on Friday, November 4, 2022

Cash flow is critical to the success of your small business but depositing checks can be a hassle, especially if you’re a start-up small business. Check out these 5 FAQs on this time-saving service.

Payments Being Collected At A Lockbox By A Third-Party Processing Team

Collecting and processing payments doesn’t have to be a challenge, even if you receive large volumes of payments from customers. You can enlist the help of time-saving banking services, like lockbox payment processing solutions, to help you manage your payments in a more secure and simplified way.

In this article, we dive into five of the most frequently asked questions from small business owners about what a lockbox system is, how it works and the benefits of using this service.

1. How Does a Lockbox Work?

Lockbox payment processing solutions is a bank-operated service to help you receive customer payments. Instead of payments being mailed to your business, they are sent to a physical post office (P.O.) box where they’re collected by a third-party processing team. The payments are opened, sorted and scanned directly at the processing center. Once that is completed, a file of the checks is created and sent to your bank for deposit into your account. All pertinent documents and information in the remittance envelope, including the correspondence, are scanned and uploaded to a secure website that can be accessed anytime. In addition, the system can download a report into your business’s accounting software to automatically balance accounts.

2. How Do I Know Whether I Should Use a Lockbox Service?

Determining whether you should use a lockbox service comes down to two things:

  1. The type of business you have
  2. The number of payments you receive

For example, large medical companies receive thousands of payments a month. A lockbox service would help streamline payment processing as well as free up time for staff to focus on other areas of the business. However, the service isn’t limited to large organizations; it can be useful if you are a start-up business and do everything from selling your product or service during the day to handling all the accounts receivables at night.

A lockbox service is beneficial if you:

  • Consistently get a large number of paper checks.
  • Don’t have the time or employee base to process physical checks quickly.
  • Work in a time-sensitive industry where saving a day or two on processing claims makes a significant difference in your customer service.

3. What Are the Benefits of Lockbox Services?

There are many advantages of lockbox services. The biggest is that it gives you more flexibility with your cash. Since it’s delivered directly to your bank account, it speeds up the receipt of payments; therefore, improving cash flow. With a faster payment schedule, accounts receivables are more rapidly up to date, providing you with better insight into which customers or services are more profitable.

Lockbox services also help reduce staff workload. If you own a smaller business, it's not uncommon for your employees to wear multiple hats. They may have to process payments on top of their regular job responsibilities, which is where lockbox can help. The service takes away some of that heavy lifting from your staff, which can be a huge cost savings to your business.

Bank lockboxes also increase the security around your payments since you have a dedicated address for only your payments. If all your mail is coming to your small business office, there’s room for error, such as payments being misplaced or even stolen.

Finally, the lockbox system is beneficial if you are looking to do business with a smaller bank but still would benefit from the services that a larger bank typically offers. 

4. How Expensive Are Lockbox Services?

The cost of lockbox services varies depending on the bank you work with; however, there is usually a monthly cost and an item transaction fee. Northwest Bank works with you to give you the services that fit your needs without overselling you on unnecessary options.

5. How Long Does Lockbox Take To Set Up?

It can take anywhere from two weeks to a month to get the payment processing system going. The bank will create the physical P.O. box and format the files and images. While most of the upfront work takes place on the bank side, it does require you to communicate with your customers about your new mailing address so they know where to send payments.

If your business receives a large number of check payments consistently and your accounting team is feeling the burden, then lockbox services can be a smart option for your small business. Reach out to one of our Treasury Service Representatives today to learn more.

Small Business Financing for the Next Step

You’ve worked hard to build your business. Now make sure it continues to thrive. Local businesses are vital to the community, which is why helping yours grow is our priority.

Talk to a Business Banker Today                                                                                       

The Author

Jason Olson

Jason Olson

Director of Treasury Management, VP

LinkedIn Email

Related Articles

View all articles


Each edition of our Biz Buzz e-newsletter is packed with small business success stories and practical ideas for building your business. Subscribe today to stay up to date on the latest in small business trends and news. 

Subscribe Now

Scroll to top