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.
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HighRadius Electronic Invoice Presentment and Payment (EIPP) Software provides tools that automate and speed up invoice communication and facilitate a faster collection of payments, enabling a closer and more convenient relationship with customers. It automates the invoice transmission and payment collection process providing a configurable solution that supports multiple invoice formats and different modes of transmission (fax, email, portal, etc.) depending on the targeted customer, its integration with ERP systems and a rich search capability enables efficient storage and retrieval of past invoices, backup attachments to minimize disputes and short pays. Apart from that it also has some key features that you would not want to miss out: level-III interchange and surcharge; self-service customer portal; invoicing across email, customer portals, post, and fax; advanced deduction management; and lightning e-payments. The result is faster invoicing and payment collection, better customer service, and improved profitability and cash flow.