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Lockbox – Functional Prospective

Posted on June 28th, 2008 by Sanjit Anand ||Email This Post Email This Post

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Is this a one of the Business scenarios:

  • Your company receiving payment from customers through mail.
  • These mails containing cheque that come from customers who dispersed across a region or the country or out of country.
  • Once Check received by AR department they normally submit all cheque with deposite slip
  • Many time because of what ever reason, AR department hold checks over a day or two or longer.
  • The totol number of customer payment per month would be 1000+.

If this is case and and your business is growing without AR work force, than get use of Lockbox services offered by Different Bank. You need to check with your banking partner, are they offering any such kind of service or not in your region.

dgreybarrow-2LockBox – An Automated Banking Solution

In Financial term normally used by bank is called Lockbox, in which bank will improve your cash flow that enhancing company’s working Capital.This is technology driven technique in which you have your customers’ payments delivered directly to a special post office box instead of your business address and then bank will take care of all your remittance activity.

dgreybarrow-2 Its via ..PO Box

You might have one quick question at this stage, Is this same PO Box, that National Postal Department using?

The answer is no, as the key difference between the Lockbox post office box number and a regular post office box is that only your customers’ payments are delivered to the box. Instead of you picking up the payments, bank’s couriers have a key to the post office box, and they remove its contents and deliver your customers’ payments to your bank. Your bank opens the payments and then processes the payments for deposit directly into your bank account.

dgreybarrow-2 The Flow

The entire business Flow can be best understood as :

Lockbox

>> What additional things bank handle when you are using Lockbox

These are the some of the services, now a days most of bank offering in LockBox Feature. This Includes

  • Automated capture of receivables and customer information as mention above
  • Consolidation of paper-based and electronic payment streams, regardless of whether the lockbox provider was the original recipient of the electronic payment.
  • Integration with accounting applications for automated receivables matching.
  • Remote check capture for accelerating the processing and/or electronic conversion of payments received outside of a lockbox or the normal receivables process.
  • In some of the case Bank provide customized business rules for handling industry-specific receivables
  • Deposit reconcilement for tracking deposits from multiple departments.
  • Manage electronic bill presentment and payment (e-bills).
  • Collections.

dgreybarrow-2Which Kind of business does Requires Lockbox

Lockbox is best used by the companies which have numerous customers base such as:

  • Public Utilities company
  • Mobile or Telecom for receiving customer Payment
  • Professional Membership/Club
  • health care

dgreybarrow-2Benefits of using LockBox

The LockBox Utilizes two primary benefits :

  1. Fund Collection
  2. Remittance Information Delivery

On top of that major benfits are that company is able to recognize the funds more quickly and customer’s check is cashed bit faster.

dgreybarrow-2AutolockBox setup:

  1. Explore
    1. Explore your banking partner how they offer Lockbox and understand the cost.
    2. Explore the integration aspect of accounting system and lockbox integration, the next is to follow these steps:
  2. Steps Involved
    1. Letting customer Know, about the channel of payment. The First you have to instruct customer to deliver there cheque and remittance advice to any any of the bank Lockbox PO Boxes. Most of bank will provide you a list of all there PO boxes.
    2. On receipt of cheque on the business day, the banking courier Partner collect items from each PO boxed and deliver to nearest Lockbox processing center.
    3. Once Cheuqe or remittance advice collected at processing center, data is captured from the cheque and remitted advice. End of day depends upon how bank provide the details you can get the data transmitted to your AR department. Most of bank now a days provide there Portal , you can download the data directly from the Portal.
  3. Oracle Configuring :These are the basic Steps in Configuring the Autolockbox in Oracle
    • Maintain Control Parameters : How Autolockbox …This should be based out of these 15 points that was mention in this post.
    • Create Lockbox Addresses for Bank
      • Bank Details
      • Bank Data file Trasmision Format

These steps should be prerequisite as per this post.

dgreybarrow-2The Importance of receivables Information

Thats true , the importance of receivable information can not be neglected.

Most of the bank passes these information,

  1. Cheque/Payment Information
    • Amount and Currency
    • Cheque/Payment Number
    • issue date and value date
  2. Remittance/invoice Information
    • Reference/invoice
    • Remitte’s Name

Once bank processed, a electronic File is transmitted and transferred to company which owns the lockbox.This files can be in one of two standard banking industry formats: BAI or BAI2 which is defined by Bank Administration Institute (BAI). In some cases and some countries if not following the standard , you can can also get use the transmitted via EDI using the ANSI X.12 823 for lockbox remittances.

dgreybarrow-2Supported Format in Oracle AR

Oracle does provide some seeded file format that you can configure based out of your need.These are the list of Files:

  • Example : The control file located under $AR_TOP/bin with name arxmpl.ctl. This format that contains an example of lockbox header information, several receipt records, and overflow receipt records.
  • Default : A standard BAI (Bank Administration Institute) format used by most banks. Underline control file would be ardeft.ctl
  • Convert :A standard format used for transferring payment information from other systems.Underline control file would be arconv.ctl
  • Cross Currency :A default format used for importing cross currency receipts. Underline control file Format would be arxcurr.ctl
  • Zengin : This is used to import bank files in the Japanese Zengin format.Underline control file Format would be arzeng.ctl

dgreybarrow-2

Global Bank & LockBox

Most of global(ABN, Bank of America, CitiBank, Deutsche, HSBC, JP Morgan and Standard Chartered) as well Local bank are offering Lockbox servics , therefore if you are planning to take an adavantage for lockbox services to boost customers’ bottom line, then Choice is Obvious.

Let me know, in case if you need some more input , I will share some more implemenation senarios.

dgreybarrow-2Similar Post

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Posted in Oracle Receivable | 4 Comments »Email This Post Email This Post |

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4 Responses
  1. prashant kumar rai Says:

    Anand, Im looking for the exact code to be written while using lock box interface, could u pls provide if any

  2. RKN Says:

    Dear Anand,
    Your article is very useful, kindly help me by clarifying the following queries
    1.How to process the credit card and EFT transactions using the Lockbox.
    2. How to get the Bank details like Bank Branch and Bank account number
    Bank will specify else do we suggest the bank for these details.
    3. Why do we use the Overflow Records transmission format, over flow indicator and over flow sequence?
    4. Use of TRANSIT_ ROUTING_ NUMBER and ACCOUNT how to get these values
    5. Other than standard validations performed by the Process Lockbox
    Program what are the other validation (client will specify or do we need to suggest client)
    6. How to process the negative amount using the Auto lockbox.
    7. How to process the credit card and EFT returns using the Auto lockbox.
    Thanks in advance for your help!
    Thanks & Regards
    RKN .

  3. RKN Says:

    Kindly help me by using some examples so that i can undersatnd easily.

  4. rkn Says:

    Dear Anand,
    Your article is very useful, kindly help me by clarifying the following queries
    1.How to process the credit card and EFT transactions using the Lockbox.
    2. How to get the Bank details like Bank Branch and Bank account number
    Bank will specify else do we suggest the bank for these details.
    3. Why do we use the Overflow Records transmission format, over flow indicator and over flow sequence?
    4. Use of TRANSIT_ ROUTING_ NUMBER and ACCOUNT how to get these values
    5. Other than standard validations performed by the Process Lockbox
    Program what are the other validation (client will specify or do we need to suggest client)
    6. How to process the negative amount using the Auto lockbox.
    7. How to process the credit card and EFT returns using the Auto lockbox.
    Please explain all the above with some examples.
    Thanks in advance for your help!
    Thanks & Regards
    rkn .

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