Is a Lockbox the Answer? Maybe.

Brian D. Meyers, CPA, Health Care Consultant 

A number of practices have asked my opinion on switching from their current post office box to a bank lockbox.  There are differences between the two and each has its pros and cons.  Ultimately, the decision differs from practice to practice based on your circumstances.

First, some background on post office boxes and bank lockboxes.  A post office box is just the place where your mail goes that isn’t at your physical location.  Both payments and other mail can be received in a post office box.  A bank lockbox, on the other hand, is where you would direct your payments for deposit.  This is a small, but key difference.  The bank lockbox is a function of your depository account with your bank.  When the items are received at the bank, they are deposited into your account and you receive copies of the checks and accompanying attachments from your bank. 

Should you change to a bank lockbox?  The answer to this question depends on several things, including what your bank offers, how much the lockbox costs, how much volume (number of deposited items) you have, and how open to automation you are. 

• Your Bank – Some banks offer very reliable lockbox services, others do not. Some banks outsource their lockbox processing. If your bank doesn’t provide reliable lockbox processing, you may need to consider switching banks.
• Lockbox expenses – vary greatly by bank. Usually there’s a flat monthly fee, then at least a per item transaction fee. If you have the documents imaged, there can also be an additional fee. You need to understand the fee structure before signing on for lockbox services.
• Volume – if you are low volume, a bank lockbox is probably not for you unless your bank charges a flat monthly fee. Your bank will be able to tell you how many deposited items you have monthly so that you can do the math. If now is not a good time, check back in six months or a year and see if the volume has changed.
• Automation – a bank lockbox requires some sophistication – not a lot, but some. To take even better advantage of the bank lockbox, can your PMS allow the bank to post directly to your A/R? I should tell you though, that you will want to check the first few times the bank posts directly to A/R to be sure it was done correctly. If it posts correctly, you’ll really see some efficiencies! 

Benefits of a bank lockbox include quicker deposit of payments into your bank account, fewer trips to the bank, better internal controls (segregation of some duties), a move toward a paperless and more efficient environment, and a potential reduction in FTE’s. 

Drawbacks of a bank lockbox include the expenses associated with it, re-training of staff, and reconciliation of the lockbox to the A/R if the items are not posted automatically to the PMS. 

To know if a bank lockbox is right for you, identify why you’re considering it.  Then talk with your bank and do some analysis to see if it makes sense financially.