The Evolution of the Lockbox

| March 8, 2017

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Since the inception of lockbox services by banking institutions in the 1930s, lockbox servicing has had some sort of an evolution. From large, manual, and labor-intensive processing centers to today’s technologically advanced computer software programs, the evolution of lockbox services has evolved at a pace never anticipated by public entities.

Lockbox servicing started over 80 years ago as a way for banks to be the first to access incoming cash from companies that owed them money. From there, banks offered their government clients lockbox services as a convenience measure to enhance relationships with their public clients. Since then, lockbox servicing has been a beneficial and often an essential tool for public entities.

 The Evolution of the Lockbox

In today’s financial environment, is there possibly a more economical solution that can have a positive income effect on public entities? I think there is.

With continued technological expansion, sustained reductions in check usage (in many localities), and increased in-house check processing tools (enabling autonomous internal check processing), entities need to reexamine/analyze their banks’ lockbox services to be sure that it is still the most economical and practical option for your entity.

Believe it or not, customer-to-government (C2G) payments are moving towards electronic payments. As more constituents are paying with fewer checks, lockbox servicing becomes more expensive. In fact, in some cases there is an immeasurably sluggish desire for banking institutions to offer lockbox servicing. What’s more, the containment of lockbox servicing is often based on an entity’s geographical location.

So what does that mean for you? We all know the pros of utilizing lockbox services, but have you considered an internal lockbox solution? It could be more financially beneficial for your office.

With more lockbox servicing taking place out of state, there are often higher fixed, variable, and per-data-point costs to absorb. Now that there is better—and more affordable—technology available to you, it makes sense to look closely at what you’re paying to maintain outside lockbox services.

If you need help designing a cost-benefit analysis for developing your own in house lockbox services, or would like assistance developing your own cost-effective in-house lockbox system, let us know.


See Us At These Upcoming Events and Conferences:

NYS GFOA Annual – March 29-31 (See Our Presentation March 30th at 2:30 p.m)
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4

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