The Advantages of Digital Lockboxes

Apr 21, 2023 by Zazil Martinez

Traditional lockbox services are no longer sufficient for many businesses in today's digital age. Inefficient and prone to payment delays, paper check processing costs can significantly impact the revenue of B2B companies.

Traditional lockbox services are considered outdated in today's digital age. Despite this, they remain the primary transaction method for many businesses. This leads to inefficiencies and payment delays, impacting cash flow and business operations.

Paper check processing costs may appear insignificant but impact the revenue of B2B companies. Digital lockboxes offer a streamlined and efficient payment processing solution to improve cash flow management, reduce processing times, and enhance business operations.

Let's explore their advantages and see how they benefit businesses.


What is a Digital Lockbox Service?

A Digital Lockbox service is a virtual holding terminal for B2B payments. It's a trusted third-party system where transactions are done from a digital device.

Once integrated with your ERP, businesses can offer a range of payment options, including ACH, eCheck, and credit cards. Scheduling payments or charging the same payment method month-to-month is also possible. This means no manual processing, which eliminates paper checks.


How Digital Lockbox Services Work

Technological advances are also helping avoid fraud from payments without enough funds. After integrating with the chosen ERP, a code is added to your site, allowing any payment option previously mentioned.

Some technologies integrate into the CRM, tracking the payments and debts of an account. They can also track dashboard information and transaction history to link and report where payments come from. In some cases, even reimbursements have become a one-step process.

When using ACH, the payor can only select an invoice to pay if enough available funds are on file. This digital payment solution is continually upgraded for convenience and to lower transaction costs. A Digital Lockbox offers many financial and economic pros that yield efficiency in any industry in which it has been used.


The advantages of Digital Lockbox Services:

Digital Lockbox Services have all the use cases of a physical lockbox service without the hassle. They're designed to make it quick and easy for customers and vendors' electronic payments.

These are some of the top advantages of a Digital Lockbox Service.

  • Variety of payment options. Offer your customer base and vendors all the payment options and scheduled payments for added convenience.
  • Eliminates mail float. Mail float is the time required for a check payment to travel through the postal system. Since digitized payments make the paper check an antiquated option, mail floats are no longer an issue.
  • Use cases of a physical lockbox but no manual hassle. Receive all the convenience to help improve the AR process without the downfall of time and margin for error of manual labor.
  • Service expenses reduced. Many companies will do their best to reduce transaction costs to avoid losing valuable margins. Digital payment options are cheaper than hiring a bank's Lockbox Service help.
  • Verified funds. Digital Lockbox Services verify that funds are on file before initiating the payment. Bounced checks and fees from faulty payments are no longer an option.
  • Easy payment trail. Track every transaction in your ERP or CRM dashboard if you opt into that level of integration.
  • Easy Integration. In most cases, integration is effortless. A few lines of code on your site are enough for the payment portal to be set up and live.

Disadvantages of Digital Lockbox Services

While digital lockbox services have gained popularity due to their benefits, it is essential to acknowledge their potential drawbacks.

  • High costs. Software-as-a-Service can be pricey and dig into your ROI. But it's not a service you want to sacrifice quality over pricing.
  • Technology can fail. Though a rare occurrence, technology has been known to fail before. Accepting funds, putting a third-party business in charge of keeping track of those funds, and being responsible for moving money is a risk. It might have a very low possibility for repercussions, but it's still there.
  • Customer reluctance. Clients can be enthusiastic about the convenience factor of a new billing portal, but there is a potential for losing clients stuck in their ways and partial to using paper checks.

Evolving from a Digital Lockbox to a Smart Lockbox

Paystand's Smart Lockbox represents a significant evolution in lockbox technology. It addresses many of the inefficiencies and drawbacks associated with traditional lockboxes.

By providing a fully digitized, ERP-integrated experience, the Smart Lockbox offers a powerful tool for optimizing workflows and reducing accounting overhead. With remote team collaboration and efficiency, it represents a significant step forward in the ongoing digital transformation of finance and accounting processes.

Contact one of our experts to optimize your AR team's efficiency and reduce accounting overhead with Paystand's Smart Lockbox.