Lockbox truncation is the process of converting a paper check into an elec­tronic deposit. The basic process is to insert a check into a check reader, which scans the magnetic ink characters on the check into a vendor-supplied software package. The software sends this information to a third-party ACH processor, which typically clears payment in one or two days. This approach removes from the typical check-handling process the need for any daily bank deposit, though most other controls involved in the standard process flow noted earlier in Exhibit 6.3 are still required. The modified process flow is shown in Exhibit 1.

The principal control addition in the exhibit is that the cashier should ver­ify that the lockbox truncation report printed by the lockbox truncation soft­ware matches the checks just entered into the system and then should initial the report to indicate that this control has been completed. This is a simple error-correction control. Also, since the truncation report replaces the de­posit slip, the truncation report is filed instead of the validated deposit slip.

Exhibit 1 System of Controls for Lockbox Truncation

[tags]lockbox, truncate lockbox[/tags]

Tags: lockbox, truncate lockbox