CHAPTER 5: CASH APPLICATION, DEDUCTIONS, AND DISPUTE MANAGEMENT
Most lockboxes require a simple interface to receive and manage remittance information. Client interfaces often require a certain degree of customization to meet specific business needs. In addition, users can generally choose from a standard selection of services, such as: Imaging of payments as they are received; Payment data captured and forwarded per client setup instructions; View daily images over the Internet 24/7/365; Daily data entry and transmission of remittance detail; Credit card and/or foreign check processing, ACH and wire transfers; Same-day lockbox deposit total; Detail reporting; and Delivery of back-up documents such as remittance documents, check photocopies, and account maintenance items (should be in a digital format). Using a lockbox can provide a number of benefits to a company. The primary benefit is the acceleration of payment and deposit by reducing float time. A lockbox can also eliminate internal receiving and handling of the check, and—after posting to the customer’s account—paying to send checks to the bank by courier, as these are still open checks and have to be protected from fraud until they are deposited. Furthermore, using a lockbox avoids delays in the payments being properly applied to outstanding invoices. Late cash application can result in the collections team making unnecessary phone calls to a customer who has already paid an invoice, which both wastes time and aggravates the customer. Lockboxes also aid in the efficiency of the accounts receivable department. The cost of a lockbox solution may be significantly less than adding staff to internally process payments. Staff can focus efforts on solving other account issues, such as deductions or payments that cannot be automatically applied. Additionally, a lockbox helps establish an audit trail for receivables paid by check. The lockbox option does not come without potential problems. These can be easily corrected with clear policy agreements and fraud prevention. For instance, checks being presented for payment will be audited to make sure there are no endorsements that will legally bind your company. These checks should not be cashed until reviewed by an AR manager. Bank staff should have been screened by security and properly trained to try to prevent errors and the temptation to commit fraud. A common occurrence of fraud involves a bank employee providing copies of checks to criminals. The check copies provide all the details that are necessary to create counterfeit checks. These copies can sometimes be obtained by counterfeiters, and by gaining access to a large number of accounts, the counterfeiter can reduce the odds of getting apprehended by submitting numerous small-dollar checks that will avoid typical sight examination processes and will not be caught by the customer until they examine their bank statements. Therefore, lockbox operations require a secured area and careful monitoring.
80
THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
Made with FlippingBook - Online catalogs