LOCKBOX TECHNOLOGY.(management of accounts receivables, collections and credit)

Professionals who manage accounts receivable and credit and collections have long depended on bank lockbox operations to feed them critical information. That traditional service is now being swept by technological changes that are delivering the same information through different channels, What credit and A/R managers need to know can reach them in a couple of hours instead of a couple of days.

Perhaps even more important, the new technology can eliminate or resolve disputes sooner, expediting cash flow and making more working capital available to companies receiving their payments through these new, high-tech channels. The biggest changes today are being driven by document imaging technology and the Internet. Tomorrow, even more changes may come from the application of intelligent character recognition (ICR) technology and "document painters." For a sense of what this progress can mean to credit managers, consider the case of one mid-sized Texas company that hasn't exactly hit its intended target yet but still is reaping the benefits of lockbox imaging.

A Half-Way Solution

Sometimes a patchwork, temporary solution turns out to work better than expected. That happy situation confronts Ross Guthrie, director of credit and collections at BJ Services Co., Houston, Texas, an oil field services firm. When Guthrie arrived a year ago, it was the bad old days of FedEx packages stuffed with a hodgepodge of paper remittance documents and check photocopies. The boxes would arrive a day after they were processed by BJ's lockbox bank--if the weather was okay and the package, containing a day's work, didn't get lost in transit, which happened at least once, he recalls.

Once the boxes arrived, it was time to sort through the clutter, pull staples and begin the manual task of applying cash, working with the paper documents and closing out accounts receivable at a computer terminal, one by one, as payments were identified and applied. "If everything worked perfectly, we'd have cash applied two to three days after the payments hit our lockbox," Guthrie says, "but it could be a lot slower--by several more days--if something went wrong."

So BJ signed up for the next level of lockbox automation--having the bank, Charlotte, NC-based Bank of America, key in invoice numbers and payment amounts, then transmit that data automatically each night to BJ's JDEdwards accounts receivable system, where payments that matched open receivables would post automatically. It's a familiar process that many companies use, and BJ's accounting system was built to receive such electronic transmissions. But connecting all the dots took programming and interfacing, and BJ's systems staff was tied up with other projects, so Guthrie was stuck paying the bank to prepare a transmission he couldn't receive. Or so it seemed.

But, strangely, he discovered that the situation wasn't so bad. The bank was using image technology to capture images of all checks and remittance documents and making them available on its web site. The report that the bank was preparing, the one that couldn't be fed into BJ's JDEdwards A/R system, could be viewed online by BJ's lone cash application clerk. It didn't take too much tech support to rig a 21-inch monitor so that the bank's lockbox report was displayed on the top half of the screen and the A/R system on the bottom. BJ typically receives anywhere from $2 million to $10 million a day through its lockbox, in 50-75 checks settling 150-200 invoices.