How many types of lockboxes are commonly recognized?

Lockboxes are a specialized banking service that organizations use to streamline the collection of accounts receivable. They are designed to expedite the processing of incoming payments by having customers remit their payments to a designated postal address where the bank collects and processes the checks.

There are three commonly recognized types of lockboxes:

1. Retail Lockboxes: These are used by companies that receive a large volume of small payments, such as consumer goods companies. Payments are often in the form of checks from individual customers.

2. Wholesale Lockboxes: These are used for higher-value transactions typically associated with business-to-business payments. Companies dealing with fewer, larger invoices benefit from this type as it allows for faster processing of these payments.

3. Check-Only Lockboxes: This type is specifically designed to handle only checks without any accompanying documents. This setup is straightforward and allows for efficiencies in processing the checks quickly.

Recognizing the various types of lockboxes is essential for companies to choose the most effective method for managing their receivables based on their customer base and payment behaviors.