I hear more and more questions about how to measure the performance of OCR and cash application automation. No surprise there – every vendor is pushing different metrics to put their own technologies in the best possible light. Many of these metrics, unfortunately, do not paint a clear picture (intentionally perhaps?). When measuring performance, it is important to know what exactly you are looking to achieve.
One common metric that keeps coming up is the kill rate or the percentage of invoices accounting system or ERP side that are successfully closed with the output of the cash application system. The problem with this metric is that it is not a measure of automation but of accuracy. It provides only a partial picture since it combines both the automated and the manual parts that the analysts do to fix exceptions and to handle non-automated payments.
Therefore, if you are looking for insight into how much your team is saving or how much more efficient they are, these metrics are not going to help you.
If you are looking to see how the team overall is functioning and performing in the presence of an automation system, you can consider metrics such as throughput or overall checks or payments processed per team member per day. These two metrics provide an accurate picture of how much automation you are getting as well as how this automation is helping your team become more efficient.
The above metrics will provide you with a measure of automation and efficiency. However, to identify opportunities for improvement, you need to drill down a bit deeper. Consider monitoring automation percentage and throughput by payment or remittance type. This will tell you whether the system and your team work better with certain remittance types than others and will pinpoint opportunities for improvement and additional automation. How are you handling paper remittance? Email? Portals? Is anything that is slow and manual that technology has not solved yet? If your cash application vendor provides a holistic automation solution that works with all remittances (paper, email, EDI, web portals), you will be able to extend the automation and realize additional savings.
Measuring the performance of a cash application automation system is easier than you think. Automation is a great promise but, as with all technology, it is important to not approach it blindly but to measure and continuously improve. Start with a measure of how many payments and invoices are never touched by your team – this is the real measure of automation. Enhance it with overall team throughput. This will show you how much you are saving from the automation and how it is impacting your team. Drill down to specific payment types, remittance formats, and customers to identify resource bottlenecks and further opportunities for improvement.
To learn more about this and other topics you should consider when automating cash application, you can watch our webinar “5 Threats to Cash Application: How OCR Can Jeopardize Your KPIs and Targets”
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Talk to our expertsHighRadius Cash Application Software enables the end-to-end automation of the cash application process that covers major benefits such as AI-enabled data capture for remittances, auto-linking of payments with open invoices, cost-cutting on lockbox fees and easy compatibility with any system due to its ERP-agnostic Saas infrastructure. Apart from the major benefits that it has, there are some key features which can not be missed out, some of them are Email Remittance capture, Discounts and Deductions Handling, Check Remittance Capture, Web Remittance Capture, Invoice Matching, and RDC & Mobile Payments.