The Cash Application Process is an important and often overlooked part of Receivables Management. Timeliness and accuracy are two key metrics looked at to measure the effectiveness of a company’s cash application process. If payments are not posted accurately and timely, inefficiencies are created in the downstream processes that include Credit, Collections, and Deduction Management. It can also have a negative impact on a company’s Day Sales Outstanding (DSO) which is a key financial ratio that illustrates how well a company’s Accounts Receivable are being managed. This process represents a great opportunity to improve efficiencies through automation.
The cash application process is highly manual, time-consuming, costly, and error-prone. Companies receive many forms of payment (check, ACH, wire transfer) across multiple lockboxes or banks and customers often provide inconsistent remittance detail in a variety of formats (paper, EDI, email attachments, online portals). On top of this ineﬃciency, the cost of paying the bank to key in data from paper remittances can be very high and only partially address the problem. Also, as you know, remittance line items can sometimes refer to alternative reference numbers that are not on the original invoice.
Audit and compliance issues arise when a company is sitting on unapplied or improperly applied cash, making accuracy and eﬃciency all the more critical. Knowing all of this, the Encyclopedia of Credit offers 10 tips/benefits on automatically applying cash:
Artificial Intelligence-enabled data capture for remittances and auto-linking of payments with open invoices eliminates errors due to manual entry. ERP agnostic SaaS infrastructure enables easy compatibility with any system.
Bayer’s Global Cash Application Roll-Out for 12 Countries
Remittance Capture & Data Aggregation: 4 Strategies To Ace Your Game