Money in the Bank


Pros, cons, and advice on using a lockbox

Looking for a way to improve cash flow by as much as three days? Want to be sure funds sent to you through the mail are in your bank account before they're posted to your billing system? Consider a lockbox.

A lockbox isn't a thing so much as a service, in which your bank collects, processes, and deposits receivables directly from a designated post office box to your account. All items collected during the business day are deposited on that day, with same-day deposit reporting available.

Using a lockbox can help your practice establish additional internal control structures for the receipt of payments. It minimizes the number of times payments are handled, reducing the risk for lost, misplaced, or misappropriated funds. Additional benefits include accelerated availability of funds; customized programs enabling specifications for late, partial, and multiple payments; and improved audit trails through transaction imaging and microfilming.

What's the cost?

While your goal in using a lockbox is to strengthen your financial picture, be aware of the fees associated with this service.

The standard maintenance fee typically includes preparing the deposit transactions, post office box rental, and daily courier services to your practice with copies of the contents you received in your lockbox. Other fees are optional and are normally charged on a per-item basis, so they will vary depending on your volume.

Keep in mind that your local bank may be willing to reduce some of its standard fees to attract your practice's business, and that a higher volume of deposits may translate into lower per-piece fees.

Consider benefits

Before signing on for a lockbox service, review the last six months of deposit activity at your practice, including how many daily deposits are made and how many items are included with each deposit. Some large group practices often do not realize that each check-in/reception area is making daily deposits. This not only makes reconciling the bank statements difficult, but weakens internal control for cash handling -- the more people who handle cash in the practice, the greater possibility of lost or misplaced money.

Once you have an idea of your volume, your bank can provide you with a clearer idea of the cost. Keep in mind that the total cost should be weighed against the financial benefits of using a lockbox, such as additional cash on hand and potential interest income. Additional savings as a result of process improvements should also be considered in reviewing the total benefit. For example, the time required to sort the daily mail might be reduced from one hour to about 15 minutes per day.

Remember, though, a lockbox isn't for every practice -- if your practice doesn't have the volume to justify the cost or the potential to increase cash flow is only minimal, then implementing a lockbox will just add additional expense to your practice.

Michael Coppola is vice president of Health Directions, LLC, a Chicago-based consulting firm providing financial turnaround and operational and strategic planning to medical groups and hospitals. He can be reached at or at

This article originally appeared in the June 2004 issue of Physicians Practice.




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