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Advantages of FinTech Accounts Receivable Automation

Do you know the advantages of accounts receivable automation?

Traditionally, a bank lockbox has been used by company Accounts Receivable departments to increase convenience and efficiency.  Lockboxes have been around for decades, and much of the traditional bank lockbox's life has been utilized for capturing payment data associated with payments made by check. Commercial banks offered this service to improve the efficiency and flow of business transactions simplifying the accounts receivables collection process.

Customers leverage the Bank Lockbox to receive check payments in one consistent location

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Bank lockboxes are strategically placed in a central location to reduce mail delivery time, which also assists with lowering the company’s Days Sales Outstanding (DSO). Banks receive the paper check, process it along with the remittance data, and send the data back to their customer. Because banks are processing checks and remittance, this decreases the customer's A/R workforce and increases their efficiency. The price of the bank lockbox is typically a monthly fee along with a per-line remittance data processing fee. Over time, or to process a large number of checks, a lockbox can be costly.

Today, however, we see a drastic shift with Accounts Payable Departments paying electronically. This shift to ePayments has elevated the FinTech industry with solutions designed to decrease business costs of processing incoming payments.

Disadvantages of a Traditional Bank Lockbox

The lockbox can be relatively costly. Banks typically earn a monthly fee along with a per line fee associated with processing payment remittance detail.

Lockboxes can contain security concerns. The traditional bank lockbox still requires a fair amount of manual re-keying data, with the majority of manual data entry attendance being entry level-administrative employees who are new to the bank or an outsourced contractor. The information from the lockbox provides all the necessary components to create a fraudulent check.

Lockboxes don’t tie into your accounting system. Bank lockboxes process your payments and remittance data and then send you the information. Your team still must input that information into your ERP to clear the cash.

Traditional Bank Lockboxes Are Creating a Problem for your Customers' AP Department.  Companies are modernizing their AP Department to eliminate manual processes and preferring to pay their customers electronically via ACH, Credit Card, or vCard. These preferred methods of ePayment are creating an increase in email remittance. FinTech solution companies have bridged the gap to assist those businesses in a cost-effective, scalable solution for automating Accounts Receivable.

Advantages of a FinTech Lockbox

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Reduction in Cost. The primary goal of the FinTech Lockbox is to reduce cost per transaction and provide an accounts receivable automation solution to allow companies to clear cash QUICKLY and improve access to your working capital.

Easy payment trail. You can easily track incoming ePayments in one place, rather than flipping through remittance emails or going to the vendor portal to download payment data. The A/R Lockbox gives you one place to house ALL your incoming electronic payments made for faster cash application.

Eliminates mail float. Mail float is a term for the time required for a check to travel from the payer to the payee through the postal service. With the increase in B2B  payments electronically, mail float is quickly becoming a product of the past. The increase in electronic payments adopting FinTech Lockboxes with a primary focus on the cost reduction and speed at which you clear cash and apply it to your working capital.

Other AR Automation Tools 

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Fully Automated AR Fintech Solution. Depending on your company, leadership, IT project management, and capital expenditure flexibility - herein lies the premium solution to your Accounts Receivable Department. The premium solution can significantly improve the daily workflow to your Accounts Receivable by immediately increasing visibility, expediting the speed of cash application, and organizing the collection process efficiently, all while keeping better track of the customer data.  Across the company implementing a premium, fully automated Accounts Receivable Solution will improve the daily workflow migrating from spreadsheets and tasks to managing processes. The companies DSO will drastically decrease while customer relations will improve. 

Is there any downside to implementing a fully Automated AR FinTech Solution?

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Cost. A fully Automated A/R FinTech Solution comes at a premium cost. Yes, the benefits of a Premium Fully Automated A/R Solution are valuable, but your company has to budget, plan, and implement a large IT project. It is not uncommon for a large A/R Automated Solution project to cost tens if not hundreds of thousands of dollars (and can take many months if not years to fully implement - which leads to the next issue.)  

Large IT Project. The length of a large IT project will require time and focus by a team of your company's staff. It is not an overnight change as there are features that have to be individually programmed to integrate with your business seamlessly. All hands on deck are needed, IT Department, Finance Leadership, and the AR Team. 

Training. Once the Large capital expenditure and extensive IT AR overhaul occurs your team will need training. The preparation for this type of project is not simple. You must rely on a hired training team to educate and train each AR Department staff member; this will take time and additional cost depending on the scope of the project. 


The cloud has revolutionized AR solutions that can be tested and implemented before a payment for the service is made.  Although this solution may be the best long-term solution, it comes at such a high cost from a human capital and financial perspective.  That said, many companies are not ready to overhaul the entire AR Department but need to gain efficiencies. Fortunately for them, other cost effective solutions can be very useful in cash application, increase visibility, and  process improvements for little to no cost.  Whichever decision you make, please research and be educated, so there are no surprises.   

In conclusion, as the preferred method of payments migrates from the paper check to electronic payments, AR Departments must identify ways to increase productivity and improve processes to clear cash and improve Days Sales Outstanding (DSO). The traditional bank lockbox, at one point in time, was very useful and efficient to process paper checks and act as a consistent location for business payments. Today, the shift in electronic B2B payments is creating an improved opportunity for AR Departments to adopt cost-effective Accounts Receivable Automation from FinTech companies that genuinely have the AR Departments' best interest in mind.

Updated on 11/14/19.

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