Cash application is an important part of your Order-to-Cash process. It affects both the internal cashflow of the business and the satisfaction of the customer.
Manually reconciling incoming payments to open customer files can be tedious and time-consuming data entry exercises. This kind of repetitive, time sensitive work that requires a high level of accuracy is what digital workers do best!
Challenges in Cash Application
It sounds easy – an invoice goes out to the customer, they pay it, we mark the money received – Done.
The truth is there can be many variations in this process that make it challenging for human Accounts Receivable (AR) teams to keep up.
- Partial payments – Customer billing cycles sometimes differ from scheduling. It’s common to have a quarterly or monthly invoice payment that is late or partial. AR clerks must track these payments to allocate appropriate payment against the correct invoice.
- Missing Information – Invoice or order numbers, bank remittance information, customer and company details, differing account emails
- Variation in incoming documents – Customer payments can come in in many forms, ACH transfers, paper checks, wires, emails describing how payments should be applied.
- Volume of transactions – A large customer base is a good problem to have, but it can cause bloat in your AR department. In high volume situations customers may have multiple open invoices at a time, making it hard to know where to apply incoming cash.
When Does Automating Cash Application Make Sense?
Of all the triggers for automating your OTC process, Volume is the biggest driver for our customers. Scaling your business should not cause matching headcount growth in your accounting department. Once you are processing more transactions than a one or two person Accounts Receivable team can manage – it’s time to add some digital workers to cost effectively scale.
By reducing the risk of errors and delays, you can improve cash flow forecasting and optimize working capital. Automating the cash application process can enhance the customer experience by providing timely and accurate payment processing, which can lead to increased customer loyalty and retention.
How Cash Application Process Automation Works
Receive and interpret customer payments
Our Cash Application Process Automation Software collects and understands information coming in from the customer side. Wires, ACH’s, bank remittance, customer portal submissions, and scanned checks are processed with OCR and ML models then integrated into your systems.
Accessing the information from your ERP, a powerful matching algorithm performs the application of the cash to customer invoices. The business rules engine accommodates complex pay structures such as Net 30 terms, partial or block payments, and automatic payment cycles.
Timely exception handling
Our Cash Application software reaches 80-90% efficiency rating for transaction handling. As with every process in Finance and Accounting, an element of oversight will be required by your expert team. For those exceptions that need review by a professional we have a convenient interface a business user can interact with. The ML model that enables Smart Matching will learn from your guidance and be able to process transactions like this in the future.
Simultaneous system updates
Once cash has been correctly applied, the software will also update your internal systems and will then notify the client how and where their payment has been applied. A record of all updates remains available for audit purposes, and management review.