How lockbox works
Instead of mailing checks to the business, customers mail them to a dedicated address managed by the bank. The bank opens the mail, deposits the checks, and scans the check images along with any remittance advice, then sends that information to the business, usually the same day or next business day. Some banks also offer a virtual lockbox that accepts electronic remittance files alongside traditional mailed checks.
Lockboxes reduce the delay between when a customer mails a check and when the cash is actually available, since the bank deposits it immediately rather than waiting for someone at the business to open mail and make a trip to the bank. The business still has to apply each payment to the correct invoice using the data the bank provides. Lockbox services are most valuable for businesses that still receive a high volume of paper checks despite the shift toward electronic payments.
Example
A wholesaler using a lockbox receives a $4,200 check from a customer on Tuesday. The bank deposits it Tuesday afternoon and sends a same-day report with the check image and account number. The accountant applies the $4,200 to the customer's open invoice on Wednesday morning, two days faster than if the check had been mailed to the office first.
Lockbox in QuickBooks Online vs Xero
Not software-specific: lockbox services are offered by banks, not accounting software, though the resulting deposit and remittance data is imported into QuickBooks Online or Xero and applied to invoices through Receive payment or Find & Match. Larger banks often provide a file feed that can be imported directly. Setting up a reliable import process between the bank's lockbox feed and the accounting software reduces manual data entry significantly.
Related terms
How LedgerBPO handles lockbox
We manage the daily lockbox report, applying each deposited check to the correct invoice as soon as the bank sends the data. A dedicated accountant flags anything that does not match cleanly so it gets resolved quickly. You get faster, more accurate cash application without anyone in your office opening mail. We set up and monitor the lockbox import process so deposits are applied the same day they are received.