What Is Lockbox in Account Receivables?

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Blog | Sep 17, 2015

What Is Lockbox in Account Receivables?

AutoLockbox is a very powerful tool provided by Oracle as it eliminates manual data entry by automatically processing receipts that are sent directly to your bank. You specify how you want this information transmitted and receivables ensures that the data is valid before creating QuickCash receipt batches.

Introduction:

AutoLockbox (or Lockbox) is a service that commercial banks offer corporate customers to enable them to outsource their accounts receivable payment processing. A lockbox operation can process millions of transactions a month.

Lockbox functionality allows customer to deposit the money directly into your bank account for the due invoices and the banker provides a data file to you. You need to have a Lockbox set up to create a Transmission Format which matches the data file format in your instance. 

Auto Lockbox 

AutoLockbox automatically creates receipts in Receivables using electronic information that your bank provides. Receivables let you specify the payment method for each Lockbox you define. Payment methods provide the default accounting information for receipts you create through AutoLockbox.

The entire business flow can be best understood as:

Lockbox


Examples for Lockbox: Check

Many of us pay our mobile bills by dropping a check in a drop box specific to the operators like Airtel, Idea and Vodafone for instance. The banker collects all the cheques and realizes the check amount on behalf of the operators. While dropping the cheque the customer mentions the details like his or her mobile number and operators name at the backside of the cheque. By this information (like Mobile Number, Customer Name etc.,) all the realized amounts will be sent to the operator through a Flat file or an excel file. 

When you run the Lockbox concurrent process the system checks the data file and matches the transmission format. If found to be a match it creates a receipt in the Receivables Module and then applies it to the invoices based on the set up you have opted for the lockbox.

If the invoice does not match then the system places the amount as unapplied receipt or on account receipt according to your setup. 
 

Generally data is imported using SQL Loader or a Web ADI.

Auto Lockbox is a feature that bank offers its customer to outsource their receivable payment processing, thus eliminating the manual data entry by processing automatic receipts which are sent directly to the bank. 

To Execute Auto Lockbox follow these steps:

Import: During this step it reads & formats the data from the bank file into the interface table AR_PAYMENTS_ALL using the SQL loader.

Validation: Here it checks the validation and if validated it will transfer to Quick cash tables AR_INTERIM_CASH_RECEIPTS_ALL & AR_INTERIM_CASH_RCPT_LINES_ALL. 

Post Quick: Here it will update the customer balance.

Bank File (Submit Import) --> AR_PAYMENTS_INTERFACE_ALL (Submit Validation) 

--> AR_INTERIM_CASH_RECEIPTS_ALL,  
AR_INTERIM_CASH_RCPT_LINES_ALL (Submit Post Quickcash)

--> AR_CASH_RECEIPTS_ALL, AR_CASH_RECEIPTS_ALL, 

AR_CASH_RECEIPT_HISTORY_ALL, AR_DISTRIBUTIONS_ALL, AR_RECEIVABLE_APPLICATIONS_ALL, AR_PAYMENT_SCHEDULES_ALL 
 

The steps on how to define auto Lockbox are given below:

  • Define the bank, branch and the bank account 
  • Define Receipt Class for the Auto Lockbox 
  • Define the Receipt Source
  • Define the Autocash Ruleset 
  • Define Customer - Attach the receipt method and create the customer bank account (Branch number and account number together decides the MICR number) 
  • Define Lockbox (Setup --> Receipts --> Lockboxes --> Lockboxes) 
  • Define Transmission Formats (Setup --> Receipts --> Lockboxes --> Transmission Formats) 
  • Modify (or create a new one) the existing control file to suit the above formats 
  • Run Autolockbox 
  • Submit Validation 
  • Submit Post Quickcash

Conclusion:

AutoLockbox is a very powerful tool provided by Oracle as it eliminates manual data entry by automatically processing receipts that are sent directly to your bank. You specify how you want this information transmitted and receivables ensures that the data is valid before creating QuickCash receipt batches. You can automatically identify the customer who remitted the receipt and optionally use AutoCash rules to determine how to apply the receipts to your customers’ outstanding debit items. The major benefit of using LockBox is that company is able to recognize the funds more quickly and customers’ check is cashed faster.

Refer to the link below for more details on the topic:

http://docs.oracle.com/cd/A60725_05/html/comnls/us/ar/lokbox.htm