Admit it, although electronic payments are great when it comes to your capital gains – it’s a nightmare when it comes to your cash application activities.
Historically, almost all of your customers used to pay by check and provide you remittance along with those checks. Since the cash application part was repetitive and time-consuming, many companies opted for automation. Companies had two forms of automation to choose from: they would either ask their banks to key-in the remittance data, or companies opted for a bolt-on automation software package that used Optical Character Recognition (OCR) technology to read the remittance data from the check images. Both the options provided companies with assistance when it came to cash application. However, with the current trend shifting towards electronic payments both of these solutions are proving to be ineffective.
The main reasons why the bank keying-in and bolt-on systems are becoming ineffective is because of the typical, complex nature of remittance data that comes in with electronic payments. Your electronic payment customers will either send you remittance via email or they will be no remittance customers. The good news for you as an AR manager is that now there are proven solutions that can solve these remittance problems.
I recently came across a company who wouldn’t allow their customers to pay via electronic fund transfer because they would then have to post the cash manually. But, the technology to read data from emails has been around for years and this technology is now being utilized for cash application. Therefore, the remittance information within your emails, whether it is in the body of the email or an attachment (pdf, excel), can easily be extracted. This remittance information can then be bundled with the payment information that comes from the bank and can automatically apply to your ledger accounts. As an AR manager, you might assume this will be an IT-intensive task, but with cloud software adoption growing, you are now able to utilize a cloud solution to implement the above email-reading technology for you. It’s as simple as redirecting your emails to the cloud software which will read the remittance data for you and send you a file to apply to your ledger accounts.
True or False? There is no way to automatically apply cash for those payments that have no remittances. The answer is False. Intelligent computer algorithms have been solving complex problems, such as stock market forecasting, for years now. Therefore, a similar and much simpler algorithm is easily capable to handle a no remittance customer. All it requires is to write a simple program that will refer to your open A/R data and create a required remittance line item that matches the payment data. For example, if Customer A paid $2,406 and did not send remittance information and there is one open invoice (invoice #2345) that matches this amount accurately, then it is easy to predict that the payment of $2,406 is for invoice #2345. More complex calculations will be required for various no remittance cases, but this is easily programmed.
Every modern AR manager should adopt solutions that will help them leverage the latest developments in their space. In this case, there are technology opportunities available that will allow a seamless replacement of check payments with electronic fund transfers.
Want to learn more? Download the webinar to learn “How JBS USA Automated Over 85% of Cash Application Operations in 3 Months with Artificial Intelligence-Powered Cloud Software”.
HighRadius 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.