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6–4 Consolidate Bank Accounts
A final issue is what to do with the residual checks that will continue to
arrive at a company. Despite its best efforts, some customers will ignore all lock-
box addresses and continue to send their checks directly to a company. When this
happens, the controller can either process the checks as usual, using all the tradi-
tional control points, or simply have the mailroom staff put all the checks into an
envelope and mail them to the lockbox. The latter approach is frequently the best
because it allows a company to completely avoid all cash deposit procedures. The
only case where the traditional cash-processing approach may still have to be fol-
lowed is when a company is in extreme need of cash and can deposit the funds
more quickly by walking them to the nearest bank branch to deposit immediately.
Otherwise, all checks should be routed through the lockbox.
Consequently, one or more lockboxes can be a highly effective way to avoid
the cumbersome check deposit procedure, while also accelerating the speed of
incoming cash flows. In only a minority of situations will a lockbox not be a cost-
effective alternative.

Cost: Installation time:

6–4 CONSOLIDATE BANK ACCOUNTS

A time-consuming chore at the beginning of each month is to complete reconcili-
ations between the bank statements for all the company’s bank accounts and the
book balances it maintains for each of those accounts. For example, a retail store
operation may have a separate bank account for each of hundreds of locations,
each of which must be reconciled. Also, if it is the controller’s policy to wait for
all bank accounts to be reconciled before issuing financial statements, this can be
the primary bottleneck operation that keeps financial statements from being
issued in a timely manner. Finally, having many bank accounts raises the possi-
bility that cash will linger in all of those accounts, resulting in less total cash
being available for investment purposes. To use the previous example, if there are
100 retail stores and each has a bank account in which is deposited $5,000 (a
decidedly modest sum for a single location), then $500,000 has been rendered
unavailable for investment. Thus, having a multitude of bank accounts leads to a
variety of downstream problems, which can seriously impact the efficiency of
some portions of the accounting department, while also reducing the amount of
cash readily available for investment purposes.
The best way to resolve the multi-account problem is to merge as many of
them together as possible. To use the previous example, rather than give a bank
account to each store, it may be possible to issue a fixed number of checks to
each location, all of which will be drawn upon the company’s central bank
account. This reduces the number of bank accounts from 100 to one. If anyone
feels that there is a danger of someone fraudulently cashing a large check on the
main bank account, this problem can be resolved by mandating a maximum