Banks have offered lockbox services for many years, where a company's customers send their payments directly to the bank, which deposits them on behalf of the company. A few of the larger banks also offer a similar outbound payment service, called a reverse lockbox, where they pay suppliers on behalf of the company. Under this approach, suppliers send their invoices to the bank rather than the company, either by mail or by entering the invoices electronically through a web site. If ariving by mail, the bank images the invoices and converts them to an electronic file that it exports to the company's accounts payable system. Up to this point, the reverse lockbox takes advantage of the regular lockbox capabilities of most banks, which is the high-speed imaging of paper documents.
A more advanced reverse lockbox solution adds business rules that allow the bank to automatically pay suppliers if dollar amounts are below a certain level and suppliers are on a pre-approved list. This can include a three-way match of supplier invoices with company purchase orders and receiving reports, and payment of the invoices if the matching amounts fall within certain business rules (which may vary by category of spend). All invoices not meeting the business rules are presented to the company via web browser for approval prior to payment.
After payments are made, the bank updates the company's accounting system to show the reduction in payable liability and cash balance.
This is a useful option for those public companies looking for a way to reduce the volume of work needed to comply with the control requirements of section 404 of the Sarbanes-Oxley Act. By shifting the bulk of the payables process to a bank, the myriad of payables controls are now the responsibility of the bank to maintain.
Thus, the reverse lockbox solution applies a very high level of automation to the payables process, while also reducing the administrative burden associated with payables controls.
The leading product in the reverse lockbox market is U.S. Bank's PowerTrack. The Powertrack system does not require a company to have a banking relationship with U.S. Bank. Instead, it can pull in funds from accounts at other banks to complete payments to customers.