Lock box Processing

[Former Member]

Hi Experts,

Can anyone brief me about lockbox...! its Processing in Bank a/cing..?....Regards...RP

[Former Member · Accepted solution]

Customer payments are posted into SAP to represent the collection of money and the application of this money against Customer outstanding in the Accounts Books. This can be performed two ways within SAP, either on an individual payment-by-payment basis, or collectively, in what is commonly called lockbox processing. In brief, lockbox processing is collective processing of Vendor payments. It is not processing bank accounting.

[Former Member · Accepted solution]

Any other inputs..! understood to some extent

[Former Member · Accepted solution]

Hi,

Pls find herwith the brief note on Lockbox processing which would help you to understand the basic function of lockbox in SAP.

Payment transactions in the USA and Canada are made almost exclusively in the form of checks. In order to process these payments quickly, banks offer lockbox services where customers can send their payments directly to the bank (lockbox). The bank deposits the checks and sends the check deposit information to the payee via electronic file transfer.

Lockbox utilization results in two primary business benefits: funds collection and remittance information delivery. The major benefits are that the company is able to recognize the funds more quickly, and the customer’s check is cashed in a more timely manner. The bank collects the payments along with the customers’ remittance information which indicates the open items the customer is paying. Data entry clerks at the bank manually enter the information into an electronic file for transmission to the company in groups of checks called batches. This electronic file is used to; 1. Update the company’s general ledger cash accounts, 2. Clear customer accounts.

The Bank Administration Institute (BAI) defines lockbox formats. In practice, the standards published by this organization are not followed strictly. Banks usually offer several variations of each format, including the BAI and BAI2 formats that SAP reads.The BAI2 format is newer and contains more information than the BAI format.

BAI and BAI2 formats differ primarily in their level of information detail. BAI does not subtotal the incoming check line items by invoice reference. One check total amount contains all invoices listed underneath it. Consequently, in BAI format files, the entire check must match the total amount for all invoices listed or be within configured payment difference tolerances.

BAI2 splits the check total into separate invoice references and corresponding payment amounts per invoice. It can also contain deduction amounts as well as the external reason code for the deduction. Within a payment targeted for multiple invoices, BAI2 format files can achieve a processing status of “Partially Applied” which means that some of the items within a check have been matched and cleared, and other invoices were not identified so their payment portion will be placed “On Account”. As a result, the hit rate or application rate percentage is higher when using BAI2 format than when using BAI format.

Hope this helps.

Assign points if you find the same helpful.

Regards,

Chirag

[Former Member · Accepted solution]

Lockbox is a function, performed by a bank, which allows the Customers of the Company to send payments directly to a bank via ‘lockbox’ (a specific mail address set-up for the company at the bank). These payments are collected by the bank and applied to the company’s bank account, with data from the payments (like check routing number, Customer bank account number, check number, payment amount and invoices being paid) being made available to the company in a file format to allow for collective processing.

The lockbox data is either sent daily to the company, or located at the bank, and retrieved by the company daily.

SAP Lockbox processing is a two step process: step 1 has User using one transaction to post multiple payments based on data file from the bank, and step 2 is a transaction to correct any un-applied payment data from step 1.