The ETM devotes a fair amount of time to lockbox processing systems in general and specifically to determining the cost or benefit of moving remittance processing from a company in-house processing center to a bank lockbox. So, you might get a question on the exam requiring you to perform this type of calculation and as I’m sure you’ve found, doing this calculation from “scratch” can take quite a bit of time. Because of this, it’s possible that you might be given some components of the calculation already completed. In any event, you can use the following template to sort out what needs to be calculated.
Float Cost Difference less Annual Lockbox Costs plus Annual In-House Costs
Here’s the breakdown of each of these components:
FLOAT COST DIFFERENCE is equal to the difference in the annual float costs of the company processing center vs. the bank lockbox.
If in order to complete this component of the calculation you need to determine either or both of the float costs, remember that float cost is calculated as follows:
Monthly Remittance Amount X Float Days X Opportunity Cost/Calendar Days in Month
Hint: If you’re given the float days for both types of processing, enter just the difference in this equation.
ANNUAL LOCKBOX COSTS are the total of annual Fixed Costs (e.g. Account Maintenance Fee) and the Variable Costs which are calculated as follows:
Annual Check Through-put X Lockbox Cost Per Check
ANNUAL IN-HOUSE COSTS are equal to:
Annual Check Through-Put X In-House Cost Per Check
-George Schilling, CTP