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.
- 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.
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