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  What are the pros and cons of using lockboxes? Frequently Asked Questions

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LockboxLockboxes can be useful for organizations with high volumes of transactions.

Some of the benefits of using them:
  • Process transactions efficiently.
  • Reduce clerical staff and allow your resources to re-directed to other areas.
  • Timely notification with a variety of delivery options.
  • Central location reduces float time. This can be particularly helpful if you move from a decentralized processing environment to a centralized one since checks will then go to one location.
  • Same employee generally handles the account all of the time.
  • Remittances are collected on a constant and consistent basis.

One disadvantage can be the additional costs, particularly if you require electronic capture of all source documentation and if you have a high volume.

There is also the aspect of quality control on the information scanned, copied or forwarded. You have to be very aware of what required controls need to be, and how to ensure that your staff is monitoring the quality appropriately.

You may also end up spending more time reconciling the bank report/statement against the certificate of deposit since you don't have the same direct control over source documents that you do in a non lockbox environment.

You may also receive complaints from donors who may not like the standardized remittance forms that typically can appear to be more like a bill than a reminder or gift commitment form.

You may need to consider who manages, controls and pays for the lockbox. If it's your own department this may not be an issue, but if it is controlled by another, then they may have different goals and objectives than you do. For example, an finance department may not feel it is worthwhile to make or archive copies of the checks, which for advancement, can provide additional and valuable donor and prospect information. It's important to negotiate all that you require up front with who is paying for the service.

If you already have an efficient processing operation, then the addition of a lockbox may not enhance your operation very much.

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