Lockbox instructions
Customer payment directions for a lockbox or controlled payment account.
Why it matters
Lockbox instructions define exactly where and how customers must send payment. If instructions are incorrect or outdated, payments may be delayed or misrouted. When instructions are sent as part of the notice of assignment, they must match the factor current collection account details. Some programs use a dedicated lockbox per seller; others use a shared lockbox with remittance detail that identifies which seller receivable is being paid. Changes to lockbox routing mid-contract are a common source of payment application errors and reserve delays.
How it appears in contracts
The factoring agreement specifies who is responsible for providing lockbox instructions to customers: the seller in pre-printed remittance instructions, the factor in the notice of assignment, or both. If the factor changes lockbox details during the contract term, the agreement should specify how sellers are notified and how long the old account remains active to capture in-flight payments. Misdirected payments during a lockbox transition are a common dispute trigger; the agreement should define which party bears the risk of delays caused by a factor-initiated banking change.
Related terms
Related reading
Sources
- International Factoring Association - International Factoring Association. Accessed 2026-05-19.
- Secured Finance Network - Secured Finance Network. Accessed 2026-05-19.