A lockbox service can protect your practice's cash

Practice Pointers. By Karen S. Schechter, AMNews contributor. July 28, 2008.

PRACTICE POINTERS

Answers to questions about the business side of your practice

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Question: Our office manager wants to obtain a lockbox at the bank to expedite deposits. However, based on the proposals we have received, this seems like an expensive proposition. How can we justify this expense? Are there other alternatives?

Answer: Your office manager is absolutely right about getting a lockbox for your practice. It not only expedites cash flow, it also may reduce personnel expenses. Most importantly, it greatly minimizes the potential for theft.

In this reference, a lockbox is not a physical thing. Obtaining a lockbox at a bank means that your receivables are mailed directly to a designated post office box. The bank picks up those receivables and deposits them into your account.

Then it informs you of changes in your account. Various banks charge various fees, often based on the number of transactions, and sell their services based on your reduced expense of processing receivables.

The first thing to consider is the time it normally takes for a check to get into your bank account after it is received.

Day 1, the check arrives at the office. Then it is opened, endorsed and placed with a deposit batch.

Day 2, the check is deposited.

If the deposit is made in the morning, then the money should be in your account that day. If it's made in the late afternoon, the money may not be in your account until Day 3.

When using a lockbox, the entire deposit transaction takes place in one day. The practice gets money into its account one to two days earlier. And if the bank offers even a small amount of interest on the account, then more money is earned.