LOCKBOX FILE CREATION GUIDE

FOR

BAI & BAI2 FORMATS

(known by Bank Administration Institute only as BAI Lockbox Communication Standards Format)

SPECIFIC LAYOUTS AND RULES

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Overview
What is a lockbox? A company can create accounts called 'lockbox' accounts at its bank (or banks) that act as payment collection
accounts for customer payments. The company then informs their customers that all open item payments for their accounts must be
submitted to one of the established bank lockbox accounts. The bank collects these payments along with the customers' remittance
information that indicates what open items the customer payments intend to clear. Data entry clerks at the bank manually enter the
information into an electronic file for transmission to the company to which the lockbox account belongs. These files are typically
transferred nightly to the various lockbox owners (companies). The files adhere to one of two customized, 30-year old Bank
Administration Institute banking industry transmission formats. The original, created in 1970, was known as BAI Lockbox
Communications Standards. It provided only basic payment details, without invoice details. Since that time, modifications have been
made by users to this BAI Lockbox standard format and this modified version has become known as "BAI2". This new 'non Bank
Administration Institute' sanctioned format now included full invoice details with payments, and is considered the latest, most
robust format for lockbox transmissions.
What is BAI? Standards for lockbox transmission files are defined by the Bank Administration Institute (BAI). Founded in 1924, the
BAI organization is a partnership composed of its own BAI membership, a Board of Directors, various banking industry advisory
groups and a professional staff. The organizational mission is "to help bank administrators achieve high levels of professional
effectiveness and to help solve significant banking problems." Activities include the definition of industry file formats, such as for
lockbox transmissions. BAI and BAI2 are the two defined lockbox transmission formats, however, both are considered 'outdated' by
the BAI organization and are no longer 'actively' supported (ie. standards are no longer updated or improved). Nonetheless, many
banks still offer transmissions in the two different BAI Lockbox Communications Standards formats.
What is the difference? As defined by SAP, as well as by the lockbox staff at most banks, BAI and BAI2 formats differ in their level
of information detail. BAI format does not separate out the incoming check line items by invoice subtotal reference. Instead, one
check total amount simply has all invoices listed underneath it. Thus, in BAI format files, the entire check amount must match
perfectly (or within configured payment difference tolerances) the total amount for all invoices listed. Otherwise, the entire check will
enter into SAP as:
1. an "On account" posting (if the payment and invoice totals don't match, but a customer is identified by MICR), or
2. an "Unprocessed" posting (if no customer account and documents could be identified from the transmission).
In these scenarios, your Accounts Receivable cash application clerks will have to perform semi-manual post-processing application
within SAP to clear unmatched payments against open items on the proper accounts.
Conversely, BAI2 format splits the check total into separate invoice references and associated payment amounts. Thus, within a
large batch, BAI2 format files will allow a "Partially applied" status in which some identifiable payments within the check total will
be matched and cleared, others will land on account. As a result, your 'hit rate' percentage of payment-to-invoice matching from each
transmission is likely to be higher when using BAI2 rather than BAI formats.
HOWEVER -- the term 'BAI2' means something very different to the Bank Administration Institute than it does in SAP or
common lockbox bank terminology. The 'real' BAI2 format actually denotes the Cash Management Balance Reporting
Specifications, Version 2. As a result, if you are to contact the BAI organization with questions about your lockbox
transmissions, be sure to mention that your 'BAI2' format is actually the BAI Lockbox Communications Standards format
(using invoice details), otherwise they will assume you are speaking about the Cash Management Balance Report.
What format should you use? This decision is dictated by a cost-benefit analysis. BAI2 is a more robust file format, but you pay
more for this information richness. BAI is cheaper, but may not offer you a suitable 'hit rate' for automatically matching payments to
customer open items. If you receive a large volume of lockbox payment transmissions each day, especially if many items are paid per
single check and deductions occur commonly, it is recommended that you use BAI2. Otherwise, a significant portion of your A/R
staff time and effort will be spent on applying failed lockbox payments. However, if you only receive a small portion of your customer
payments via lockbox transmissions, then BAI format is likely to provide adequate results. You will have to inquire with your bank to
ensure that they still utilize the BAI format.
If you have further questions about the Bank Administration Institute, or its file format standards, you can reach them by phone at
800-224-9889, or on the Internet at http://www.bai.org. The primary contact at the Bank Administration Institute is Mr. Brian Black,
Managing Director or Operations and Technology.

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THE

PURPOSE OF THIS DOCUMENT:

The lockbox file generation programs within SAP (RFEBLBT1 and RFEBLBT2) are designed to create their
own open items in the system, and create the corresponding lockbox file that perfectly matches these
open items. The result is that the open items are completely cleared by the program. This is useful
for illustrating the basic function of reading a basic lockbox file. However, for consultants to test their
clients own unique, complex lockbox import and postprocessing scenarios, a more flexible method of
lockbox file creation is needed.
This document is designed to do two things:
1. To clearly explain the elements of a lockbox file (in both the so-called BAI and BAI2 formats)
2.

To help consultants to design their own custom lockbox files which enable them to test numerous
business scenarios in a quick, repeatable fashion.

At the end of this document are several different examples of .txt files that illustrate how each file can
be modified to test different business scenarios. The specific lockbox files in this document were
designed as part of the creation of lockbox pre-configuration for the 4.5A release. These files may be
modified as often as you need to test each scenario. There are also a few configuration tips included
at the back of the document that relate to how to maintain file format consistency with what is defined
within lockbox configuration.
This document is written using color-coding to allow easier reading and interpretation of the data than
if using variable fonts, underlining, etc. If you intend to print out this document for your reference, you
will need to use a color printer. However, the fields also contain number assignments, so a black and
white printout will still be readable.

LOCKBOX BAI TEMPLATE

FOR

USE WITHIN

THE

LOCKBOX DATA IMPORT PROGRAM

Sample Lockbox file:

100DC026
79960
9910201201
2DC026
79960
5001001 79960991020 DC026
79960
60010020001000000011000390997755331 00091230218000019 18000020 18000021
400100360171800002218000023 18000024 18000025 18000026 18000027
4001004601918000028
700100500123459812150100001000000
80010060012345981215001000010000009 1000000 1000000
9000010
Note: this file illustrates a scenario in which only one lockbox transmission is imported, and only one
batch exists within that lockbox transmission. A lockbox import file may contain several different lockbox
transmissions (from different banks) each contained between their own 1 and 9 records. Further, multiple
batches can exist within a single lockbox. The original Bank Administration Institutes BAI Lockbox
Communications Standards format offer records 1 through 9. SAP only requires minimally the 1, 5, 6 and 4
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records to function properly. You may choose to include other records simply to visually differentiate the
data sections within a transmission for later problem resolution if necessary.

Understanding SAP Lockbox.doc

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