Author: Chris Kestel, Public Entity Relationship Manager, Commercial Banking
- The challenges of processing high volumes of paper checks.
- How Lockbox automation improves payment processing speed, cash flow visibility and security.
- Why Metropolitan Utilities District in Omaha. chose FNBO as a trusted, competitively priced partner for secure payment processing.
Metropolitan Utilities District (M.U.D.) is the sole provider of natural gas and water in the Omaha metropolitan area. In fact, M.U.D. serves more than 600,000 customers in about 240,000 households. When you consider each customer is making a monthly payment, you get a sense of the volume of paper checks the company receives and processes. Efficient and timely payment processing is critical to preventing utility service disruptions.
However, processing payments in-house can quickly become a labor-intensive and costly task for businesses like M.U.D. With a high-volume of check payments received, M.U.D. owned a remittance processing machine; but when the equipment needed an expensive upgrade, the company began to consider other options. A Lockbox solution rose to the top because its modern payment processing provides faster and more secure payments.
What Are the Problems with Check Payments?
Despite significant technology advancements, many businesses continue to confront challenges in receiving payments and ensuring timely processing and reconciliation of funds. For 32% of companies, slow processing speeds impact liquidity, and 37% need to accelerate cash flow.
Paper checks remain a particular sticking point in the payment process. Payments received by mail must find their way through internal routing systems before the appropriate teams can receive and process the checks, creating lost time known as processing float.
Unfortunately, business challenges with check payments don’t stop there. The AFP Payments Fraud and Control Survey found that checks remain the method most susceptible to fraudulent activity, with 65% of companies reporting instances of actual or attempted check fraud.
Internal payment systems play a part in slowing processing times and increasing the risks a business faces. Outdated technology leads to manual workflows that introduce errors and open companies to fraud, theft or unauthorized deposit activity. It may be hard for many businesses to believe, but 3% of fraud is initiated by internal employees, according to the AFP Survey.
What Is Lockbox?
A Lockbox solution offers a controlled and efficient way to process check payments. Payments are mailed to a secure post office box held in a company’s name and controlled by the provider bank. Once received, payments are opened, immediately scanned and deposited directly into the business’ bank account — usually on the same day.
Businesses can view image scans of each deposited check, as well as any correspondence received, through an online portal. Other services, such as exception viewing and resolution or remote deposit capture, are also available.
Lockbox services are particularly beneficial for businesses that receive a high volume of check payments. They accelerate the collection and processing of customer payments, reduce manual handling and improve operational efficiency.
Why Did M.U.D Choose FNBO as a Lockbox Provider?
Being at a crossroads with the need to replace costly equipment, M.U.D. decided it was ready to pursue an offsite payment processor.
“Several companies responded to our RFP,” said Kris Zeitner, M.U.D. Supervisor, Customer Receivables. “FNBO was chosen through that process because they met our stringent specifications and offered advantageous pricing models.”
FNBO’s Lockbox Solution is widely recognized as a competitively priced solution for handling check payments, but Zeitner also called out the solution’s superior efficiency and how quickly M.U.D. now has access to funds.
By automating the intake, scanning and deposit of checks, the FNBO’s Lockbox solution eliminates the need for employees to open mail, make trips to the bank and log payments — all areas where delays and fraud can be introduced. As a result, automation reduces float time and Days Sales Outstanding (DSO), leading to more predictable cash flow, the potential for enhanced liquidity and reduced risk.
Businesses also gain a major benefit from FNBO’s experienced Lockbox team. This seasoned group digs in to understand a customer’s current process and offers customized recommendations to ensure the FNBO Lockbox solution meets the company’s unique needs, while also streamlining the process. Daily payment processing is conducted with stringent quality controls for enhanced security, and businesses receive expedited payment processing, which leads to quicker funds access and improved accounts accuracy.
FNBO Lockbox solutions also provide businesses with enhanced visibility of their receivables via a secure online portal. AR teams have access to all scanned check images and remittance data and can easily manage any payment exceptions. Reporting and archiving allow a business to see any notes customers’ send in with their payments.
“FNBO takes care of everything, from picking up our mail, to automatically processing it and sending us a file at the end of the day with our payments,” said Zeitner. “It is very easy to use and executes customer payments quickly, much faster than our teams could manage with our former workflows and technology.”
The two companies have a strong connection in other ways, too. M.U.D. has traditional banking services, a line of credit and purchasing credit cards with FNBO. And the bank is an M.U.D. customer.
“We like that they are in Omaha, and that we are partnering with one of our customers,” said Zeitner.
FNBO’s Lockbox provides a scalable and cost-effective alternative to internal check processing, reducing risks, accelerating cash flow and freeing employees to focus on higher-value tasks. And FNBO’s Lockbox team is dedicated to analyzing a company’s needs, offering advice and providing excellent customer service.
To learn more about Lockbox services, visit our website. Or read a case study from another company that chose FNBO for its Lockbox services.
About the Author
As a Relationship Manager serving the Public Sector for Commercial Banking, Chris works with communities across Eastern Nebraska, Kansas and Texas areas including the cities of Omaha, Lincoln, Fremont, Kansas City and North Dallas. Taking a wholistic approach, he helps clients with business banking and treasury functions, guiding day-to-day operations and identifying solutions to help meet both short- and long-term goals for entities within the public sector.
