What is a lockbox in accounts receivable?

A lockbox is a service offered by banks in which customer payments, typically paper checks, are mailed to a special PO box operated by the bank. The bank opens the mail, deposits the checks, and sends the business a digital feed of payment data. The business never handles the physical mail or the physical check.

Lockboxes matter for two reasons: speed and accuracy. Checks mailed to a company's own address often sit in a pile for days before someone opens them, reconciles them, and takes them to deposit. A lockbox cuts that cycle to hours. And because banks process thousands of these per day, their data entry is faster and usually more accurate than an in-house bookkeeper fielding checks between other duties.

Lockboxes are especially common in industries that still receive a large share of payments by paper check: healthcare, insurance, subscriptions, and parts of B2B manufacturing. For businesses increasingly being paid by ACH and card, the lockbox is becoming less central, but it remains an important piece of AR infrastructure anywhere paper still shows up.