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Using
Lock Boxes For Client Payments
 | Original Publication: DICTA
(Publication of the KBA) |
| Author: Bonnie Holmes, Tennessee Valley
Authority |
| Date Published: January, 2000 |
Have you considered using
a lock box arrangement with your bank? This arrangement allows clients
the ability to forward their check to a post office box accessible by
the bank. The advantages could be worth the costs.
The Advantages:
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Faster check deposits
(1-2 days) can offset lock box costs. |
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Firms can reduce
staff time devoted to deposit processing. This advantage works only
if a significant percentage of your check deposits are made through
the lock box. Some firms successfully make the change by including
self-addressed (with postage paid) envelopes with each bill to break
the habit of clients remitting checks directly to the attorneys. |
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Banks can make daily
reports and copies of information sent by the client available to
the firm. Firms can receive the total amount of the deposits via
modem at specified times. |
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Quicker clearance of
funds could earn money for the firm in interest-bearing accounts. |
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Cash collected on the
last day of the month is greater than your current collection
method. |
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If you have a bank
client, this might be a good marketing device. |
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Many corporate
clients used to this process wonder why it takes law firms so long
to adopt it. |
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If you have a
financial package that produces a remittance advice then the
benefits are definitely with the lock box concept. |
The Disadvantages:
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Errors can be
frustrating and time consuming to resolve. |
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Staff time is still
required for those clients who will not utilize the lock box . Some
large firms find that clients persist in sending their checks to the
firm and/or to specific lawyers in the firms. |
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The process may be
difficult to use with a Lawyer's Trust Account as checks could be
deposited in the general account. |
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If your firm is a
cash-basis taxpayer trying to minimize taxable income, receipt of a
large deposit on the last day of the year could cause problems in
distinguishing fees (income statement impact) from client
disbursement/advances (balance sheet impact). |
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