Lockbox banking is a payment service that collects and processes cash and check payments for your organization. This streamlined method is often best for companies or HOAs that still receive paper checks. Lockbox banking can help HOAs receive and process funds faster and more securely through automated lockbox payment processing. 

The guide below explores how lockbox services work, including electronic lockboxes. You will learn the different types of services HOAs can choose from and key advantages and disadvantages to consider. When you’re ready to discuss lockbox banking services for your HOA, we’ll be here to help you take the first steps. 

What is lockbox banking? 

Lockbox banking is a service offered by banks to help businesses collect and process payments more efficiently through automated remittance processing. It works best for companies that regularly receive paper checks, because it automates how those payments are collected, processed, and recorded. For companies that don’t rely on paper checks, this service may not be the right fit.

Banks that offer lockbox services securely handle payments, so businesses don’t have to devote valuable time or resources. Companies can oversee and review cash flow through detailed bank reports, and most lockbox services can connect directly with a business’s accounting software systems. 

Electronic lockboxes

Electronic lockboxes, otherwise known as e-lockboxes, function similarly to physical lockboxes but handle everything online as part of a modern digital lockbox banking solution. They process the same types of payments as a traditional lockbox, such as accepting checks. However, unlike physical lockboxes, oversight of incoming payments is done entirely virtually for credit card payments, electronic checks, and more.

How does lockbox banking work?

Once a property management company or community association sets up a lockbox solution with Popular Association Banking, homeowners can send their payments directly to the assigned lockbox remittance address, (typically a P.O. box). The bank receives the payment, verifies that the information is accurate, and then deposits the funds into the appropriate account. Most funds are typically deposited into an community association’s ’s account within a short time, allowing the community associations to benefit from a faster lockbox payment processing workflow.

Types of lockbox banking

Processing speeds and fees vary among the different types of lockbox services. Retail lockbox banking works best for businesses that receive multiple small payments and need high-volume lockbox processing. Wholesale lockboxes are designed for larger payments that come in less often. The sections below break down the key differences between these two lockbox options.

Retail

Companies that receive numerous low-dollar payments typically choose retail lockbox services. Banks that offer this type of lockbox banking are equipped to process lots of transactions rapidly. Community association assessment payments, for example, are ideal organizations for retail lockbox banking.

Wholesale

In contrast, banks that offer wholesale lockbox banking services typically handle a smaller number of higher-dollar payments. In many cases, these transactions require manual processing to ensure the critical details are correct. Wholesale lockbox services often involves a careful balance between processing times and close supervision of transactional payments. 

Pros and cons of lockbox banking

Property management companies and community associations can benefit from lockbox banking. It is best to weigh the costs against the benefits before choosing a bank that offers lockbox services. The lists below outline the advantages and disadvantages that can help you make an informed decision. 

PROS of a bank lockbox

• Improved convenience for homeowners
• Better cash flow management and visibility  
• Fewer accounting errors
• More payment options for residents
• Access to digital lockbox solutions
• Frees up time for property management companies and community associations to focus on other responsibilities
• Faster processing compared to traditional paper
• Automatic account receivables updates (depending on your accounting application)

CONS of a bank lockbox 

• Some increased risk of checks being lost or stolen from the mailbox or office, or payments being delayed
• Potential for payment processing errors when handled manually
• Additional burden on office staff manually processing payments.
• There may be service fees for having a lockbox service
• Connecting your service with accounting software can cost extra 
• Manual check payment processing is still slower than electronic payment

The difference between lockboxes, safe deposit boxes, and P.O. boxes.

Understanding the differences between safe deposit boxes, P.O. boxes, and a bank-managed lockbox service can help property management companies and community associations avoid confusion. A P.O. box is simply a mailing address and is not tied to a bank. It involves receiving mail at a local post office address for personal or business purposes. A P.O. box can be assigned by the bank lockbox service strictly for homeowner assessment payments. On the other hand, a safe deposit box is a secure storage space inside a bank vault for valuables, and not a payment processing tool.

Take control of your payment processing with lockbox banking.

Lockbox banking services can assist HOAs with payment processing more efficiently, especially when handling large volumes. Speak to a Cash Management or Relationship Manager to discuss your options today. Our friendly and knowledgeable Relationship Managers can offer you a quote on how much this service would cost and help you determine if it’s a viable option for you and your community.