- SAP Managed Tags:
Introduction:
Lockbox is a service provided by banks to process faster payments and reconcile the open account receivable invoices of the company/organization it is associated with. Lockbox is a postbox created by the bank at strategic geographies where a company expects its business to collect receivables. The company informs its customers to deposit the remittance in the designated lockboxes and bank professionals make sure the lockboxes are checked frequently to collect checks remittance information (related to invoice the payment is against) and payment is credited to the company's account. This process of lockbox ensures - fast payment processing, improved accounts receivable, accurate and timely information of the cash inflow.
On the contrary, there are few disadvantages like - fee per payment, chances of theft, not very useful for company with many payments in small denomination (since it will result in higher lockbox fee).
Types of lockbox format SAP supports:
BAI stands for Bank Administration Institute. BAI file format includes basic information like -
On the other hand, BAI2 file format includes detailed information like -
In this article, I will be focussing on BAI2 format which also happens to be the most widely used and accepted format across banks and companies implementing SAP ERP.
BAI2 file structure (sample):
These record with the lockbox file can be explained with below structures:
SAP configuration behind lockbox processing:
Configure house bank:
FI12
OBAX
OBAY
OB10
Transaction:
Customer invoice: FB70
FBL2:
The open customer invoice should now be cleared:
FBL5N:
Post processing:
For the checks that have not been applied i.e. they fall under either of - partially applied, on-account or unidentified.
FLB2:
This is the case of on-account posted status.
Now, to change the on-account to applied, post processing can be done on this lockbox file using FLB1
FLB1:
Select the line and click on "Edit payment advice"
As you can see, payment advice balance is not zero. You will have to edit it manually to make it zero. Click on Fast Entry to make the balance zero
Click on Save and then Edit - Post
Now check the receivable:
FBL5N:
Check the lockbox overview to confirm the payment has been applied:
FLB1:
Note - Similar post processing steps can be done in case of unapplied/unprocessed scenario. In case of partially applied scenario, select the payment advice and click on Edit-Post, this will ensure automatically clearing.
Journal Entry posted via lockbox and EBS:
Lockbox:
Dr bank clearing Dr lbx clearing
Cr lbx clearing Cr customer a/c
EBS:
Dr main bank GL
Cr bank clearing
Conclusion: Lockbox service is widely accepted and used but due to its processing fee and chances of theft, new technology has emerged which ensures seamless integration with company's accounts receivable process that provides electronic check deposits, remittance/form processing and cash application which would automate the complete process of receivable reconciliation and cash application process.
Lockbox is a service provided by banks to process faster payments and reconcile the open account receivable invoices of the company/organization it is associated with. Lockbox is a postbox created by the bank at strategic geographies where a company expects its business to collect receivables. The company informs its customers to deposit the remittance in the designated lockboxes and bank professionals make sure the lockboxes are checked frequently to collect checks remittance information (related to invoice the payment is against) and payment is credited to the company's account. This process of lockbox ensures - fast payment processing, improved accounts receivable, accurate and timely information of the cash inflow.
On the contrary, there are few disadvantages like - fee per payment, chances of theft, not very useful for company with many payments in small denomination (since it will result in higher lockbox fee).
Types of lockbox format SAP supports:
- BAI
- BAI2
BAI stands for Bank Administration Institute. BAI file format includes basic information like -
- customer MICR
- check amount
- invoice number
On the other hand, BAI2 file format includes detailed information like -
- customer MICR
- check amount
- invoice number
- payment amount per invoice
- deduction amount per invoice
- reason code (deduction)
In this article, I will be focussing on BAI2 format which also happens to be the most widely used and accepted format across banks and companies implementing SAP ERP.
BAI2 file structure (sample):
These record with the lockbox file can be explained with below structures:
Record 1 - Header
Record 2 - Service
Record 4 - Overflow
Record 5 - Detail header
Record 6 - Detail
Record 7 - Batch total
Record 8 - Lockbox total
Record 9 - Trailer
SAP configuration behind lockbox processing:
Configure house bank:
FI12
OBAX
OBAY
OB10
Transaction:
Customer invoice: FB70
FBL2:
The open customer invoice should now be cleared:
FBL5N:
Post processing:
For the checks that have not been applied i.e. they fall under either of - partially applied, on-account or unidentified.
FLB2:
This is the case of on-account posted status.
Now, to change the on-account to applied, post processing can be done on this lockbox file using FLB1
FLB1:
Select the line and click on "Edit payment advice"
As you can see, payment advice balance is not zero. You will have to edit it manually to make it zero. Click on Fast Entry to make the balance zero
Click on Save and then Edit - Post
Now check the receivable:
FBL5N:
Check the lockbox overview to confirm the payment has been applied:
FLB1:
Note - Similar post processing steps can be done in case of unapplied/unprocessed scenario. In case of partially applied scenario, select the payment advice and click on Edit-Post, this will ensure automatically clearing.
Journal Entry posted via lockbox and EBS:
Lockbox:
Dr bank clearing Dr lbx clearing
Cr lbx clearing Cr customer a/c
EBS:
Dr main bank GL
Cr bank clearing
Conclusion: Lockbox service is widely accepted and used but due to its processing fee and chances of theft, new technology has emerged which ensures seamless integration with company's accounts receivable process that provides electronic check deposits, remittance/form processing and cash application which would automate the complete process of receivable reconciliation and cash application process.
3 Comments
