What is a lockbox service?

A lockbox service is a bank-provided payment processing service in which client payments are sent to a special postal address, processed by the bank, and deposited directly into the firm's account, often the same day. For professional service firms receiving significant check payments, lockboxes accelerate cash availability, reduce internal processing burden, and provide detailed remittance information. The service typically charges a monthly fee plus per-item processing charges.

Key characteristics

• Bank processes payments on behalf of the business

• Accelerates the deposit of check payments

• Reduces internal payment processing burden

• Provides detailed remittance reporting

• Costs include a monthly fee plus per-item charges

• Most valuable for high check volume businesses

Why it matters for professional service firms

Lockbox services accelerate cash availability for firms receiving check payments. A check mailed to your office, processed by your staff, and deposited might take 3 to 5 days from receipt to available cash. A lockbox can reduce this to same-day or next-day delivery. For firms with significant check volume, the acceleration is valuable: $500K in monthly checks available 3 days sooner frees up working capital. However, as electronic payments increase, the value of lockbox diminishes. Professional service firms should evaluate lockbox versus electronic payment encouragement based on their specific payment mix.

Real-world example

David's firm received 70% of payments by check, averaging $250K per month. Typical processing: mail received, check logged, deposited next branch visit, funds available in 2 to 3 days. Total float: 4 to 6 days. Implementing lockbox reduced this to a maximum of 1 day. Impact: $250K multiplied by 4 days acceleration equals approximately $33K additional average cash available. Lockbox cost: $200 monthly plus $0.50 per item ($350 monthly total). The improved cash position was worth the cost. However, David also began encouraging electronic payments, which required no lockbox and provided immediate availability.