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Glossary

Lockbox

A lockbox is a service in which a bank or processing provider receives payments and remittance documents at a designated address, processes them, and supplies deposit and payment information to the business.

Payments & Repayment

How a lockbox works

Customers send checks and payment documents to a designated mailing address. The provider collects mail, captures check and remittance data, processes deposits, and sends reports or files to the business.

Retail services commonly handle many consumer payments. Wholesale services may capture more complex business remittance details. Provider capabilities differ.

Deposit is not invoice reconciliation

A bank deposit does not necessarily show which invoices were paid.

Hypothetical example: A $2,000 check covers three invoices but has no readable invoice references. The receipt needs investigation before it can be allocated accurately. Collection reminders should account for that pending match.

Returned checks, duplicate records, short payments, missing references, and scanning errors also need an exception process.

What to review

Agree processing cutoffs, reporting frequency, funds-availability terms, fees, access controls, and integration requirements. There is no universal 24- or 48-hour availability guarantee.

Reconcile provider reports with bank activity and the receivables ledger. Outsourced processing does not remove the business's responsibility to monitor exceptions.

Reference: Treasury explanation of lockbox processing, an example of the service model rather than a universal availability promise.

FAQ

Frequently asked questions

Does a lockbox automatically close invoices?

No. Payment data must be matched and applied to the correct invoices.

Are deposited checks guaranteed final funds?

No. Returns and other exceptions can occur; funds availability and final payment are different concepts.

Does every lockbox provide real-time updates?

No. Processing and reporting schedules depend on the service agreement and integration.

Related terms
ERP SystemOpen Invoice