SAP Lockbox - What , Why and How

Almost an year ago, I had written an article on EDI processing (more here) where I had mentioned about 820 and 823 and jolted briefly that it is known as "Lockbox". In this section, I will be discussing more in detail about what lockbox is and where and why it is used.


In an organization that is dealing with procurement and sales, a financial transaction takes places and mostly these transactions go through banking system.
Let us take a day to day example where a small company "A" sells services to its nearby vendors. Now, in this case the company "A" sends out its armored security to collect the cheques (bi-weekly/monthly) or uses applications provided by the banks (similar to PayPal?) to complete the transactions.


Now the advantage of this is that the required amount is transferred securely to A's bank account but on the cons side, the Accounting clerk would have to manually tally the account in their system. i.e sort of double entry. So the major issue that we see here is the data redundancy and the processing time.
Imagine if the number of vendor grows extensively.
In order to reduce the processing time SAP has provided the option of integrating the banking details within the ERP system.
The typical payment process is as follows
  • Company A opens an account with the Bank B and these secured accounts are known as "Lockbox"
  • Clients are provided with the lockbox details for payment processing
  • Once the payment is processed an IDoc (or any electronic document) is sent from the bank to the ERP system.
  • The incoming feed from the lockbox is then processed in the R/3 system and corresponding postings and G/L accounts are processed.
As far as I know, Lockbox payment method is quite famous throughout North America. There are 2 types of transfer documents used BAI and BAI2. The initial one is used for single payments and in cases where the incoming cheque is to be split into more than one, BAI2 format is used.

I will also post a video tutorial of how to configure and process lockbox in near future
Again this is my limited knowledge but if there is more information, please do post in the comments section

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