Treasury Management - Lockboxes & A/R integration Flashcards
What are LockBoxes?
A deposit mechanism used by entities to facilitate their
deposit transaction volume. Typically, commercial firms
and businesses direct customers to send payments directly to a financial institution address, a post office box controlled by the institution or directly using electronic tools. Financial institution personnel record the payments received and prepare deposit slips. Subsequent processing proceeds as with other deposit taking activities. (somebody is going to pick up these check and bring them to a financial instituion)
What are the two types of Lockboxes?
– Retail, usually large volume of transactions and low
dollar amount per payment. Invoices are encoded ex:
phone company, utility service
– Wholesale, usually low volume of transaction and high
value per payment. Manual data collection
What is the principal of LockBoxes?
Instead of mailing a checks to the company, you mail it to a post office box. Financial institution will go to that post office box daily, collect the money and deposit everything into the company’s account. (in addition their are many other tools to pay, not only checks). LockBoxes can also do the other thing around where you can pay. Company has to pay suppliers/employees.
Why would a corporation go that way instead of receiving the checks in hand?
it was saving the internal processing flow, the mail flow, the clearing flow, but they have to pay for the p. o box. And the processing of the mailbox.
Why would some company would be interested to find out what is the tool, the client used to pay them.
it’ll help them analyze, which services are being used by clients and how they can save money
When will a payment bounce back to the company?
closed account or wrong account number
What is the purpose of Account receivable department?
accounts receivable department report that includes the tracking of accounts, so they can figure out what is past due. Who’s paying within 30 days was paying to 60, 60 to 90 and 90 days
What is consolidation of Account?
You have to take all the balances of all the accounts within your group, and you calculate the net position. And you say, this is the net for company, or within the structure
