10 Benefits of Automating your Accounts Receivable Cash Application Process

What’s more, cash application automation software equipped with AI can remember those weird formatting issues and correct them on future payments. If you receive a payment without remittance advice but have been paid by that customer before, AI-powered cash application automation software can match it with the right account based on data like the numbers at the bottom of a check. This intelligent solution leverages automation, analytics and AI to match invoices to incoming payments and remittances that come in multiple data and document formats in multiple languages and multiple currencies. Once the payment is received, cash application analysts proceed to match the payments with their corresponding open invoices.

Leverage AR automation to eliminate manual accounts receivable processes, gain visibility and control, and achieve the most efficient end-to-end invoice-to-cash process. From compliant electronic invoice generation to cash in the bank—fully applied and closed. The best cash application solutions solve all the challenges discussed in this guide and drive majorefficiency improvements by automating the majority of manual work. That way you can reap thebenefits—resulting in a better operation for you and your customers.

1. We have successfully led numerous cash application transformation projects for order-to-cash organizations spanning various regions and industries.
2. One of the most important things to understand about cash application is that no two companies follow the exact same process.
3. Our advanced character recognition technology takes those illegible characters, unstructured formats, and missing information, and quickly and reliably analyzes, normalizes, and imports them into our platform.
4. In the digital age, cash application becomes significantly more prominent due to the multitude of payment methods available to customers.

Improve your team’s productivity by automating remittance capture from various sources, freeing them from repetitive, non-value-added tasks. But with technology taking most of that work out of your team’s hands, accounts receivable staff can be freed up to work on more strategic—and personally fulfilling—work. Cash application automation software can also analyze, normalize, and add structure to irregularly formatted remittance data. After weeks of pursuing several overdue invoices from a customer, you finally receive payment in the form of a bank transfer.

This enhanced visibility into working capital supports daily planning, aiding in pivotal investment and business decisions that drive growth. The automated cash application process ensures businesses are promptly informed about the amount and location of accessible cash, enabling them to seize opportunities for enhanced profitability and make well-informed strategic decisions. HighRadius’ cash application tool is highly customizable, and the vendor can custom-build features based on your business requirements.

Without a streamlined and efficient cash application process, there’s no guarantee that the cash received from customers correlates with what is owed to the business. There is also an impact on your customers and their future ability to transact with you, as well as your ability to utilize the cash within the business itself. When funds aren’t withdrawn from their accounts in a timely fashion or they don’t receive a receipt, their accounting gets more difficult and their forecasting suffers as a result. Cash application has always been a laborious process, but before the internet, it was simpler. Now, there are so many sources and types of payments that without a good cash application system, your accounts receivable apartment could be drowning in a flood of payments without much detail and be stuck guessing where to apply them.

How is Cash Application Used?

This crucial practice enables businesses to effectively monitor the flow of cash and capital, ensuring that funds are utilized with utmost efficiency, accuracy, and promptness. Cash application is the process of matching customer payments and remittance info to corresponding invoices. Unless this is done and the cash is posted in the ERP system, the funds will not be available for use. With most global businesses operating under a typical shared services model, prioritizing cost reduction over customer satisfaction has only led to diminished customer retention.

Receiving Payment and Remittance

Because of these all-too-common disruptions, the cash application process is often overly complex and time-consuming, with specialists frequently spending hours matching and applying payments to invoices. Multiply this process for the dozens of (if not more) payments received daily, and this workload quickly becomes unmanageable for an accounts receivable (AR) team of any size. An advanced AR Cash Application solution will process lockbox files and other types of customer payment files, seamlessly matching payments to the correct customer invoice, account, and remittance information. If your business receives large quantities of high-volume cash receipts the process of manually matching the files to customer invoices is expensive, inefficient, error-prone, and an overall security risk.

A Finance Leader’s Guide to AI-Powered Cash Application

Consolidating your banking and treasury functions into one platform keeps your accounting and finance teams better informed and organized. Automating your AR processes with a solution that is built directly into your ERP, like SK Global’s ar cash application module, makes it easy for your business to maintain accurate records of your financial affairs in real-time. Posting on-time and precise cash statements will give your financial executives improved visibility on cash inflows.

The key elements of cash application are the invoice, the payment, and the remittance advice. In a typical B2B sales process, the supplier delivers goods or services, expecting payment at a later date. When a buyer makes use of the entire line of credit, they can’t make further purchases unless the past purchase payments are paid https://1investing.in/ off. If the supplier’s cash application process is slow, it delays the credit replenishment for the buyer. When manually performing cash applications, it becomes necessary to allocate personnel to meticulously analyze a nd input remittance data, especially in cases where the information is either missing or difficult to decipher.

The automated cash application process offers distinct opportunities for business growth by facilitating quicker access to reliable data for AR teams. The cash application process involves you recording revenue once you’ve received a payment. This includes matching incoming payments to the correct remittance information, invoices, and customer accounts so you can deduct the amounts from your remaining unpaid receivables. Many companies experience low automation rates due to country and industry specific cash application challenges. With Serrala´s FS² AutoBank software you will automate the cash application process from end-to-end, achieve highest possible automation rates and you will reduce manual and repetitive tasks to a minimum. Our solutions are fully integrated with your current SAP environment (S/4HANA or previous systems like ECC) and embedded in SAP which means you can post and update data in SAP in real time.

Consequently, the automated cash application process also enhances visibility throughout the entire AR cycle. Outdated decentralized and fragmented processes become obsolete, enabling AR teams to monitor crucial Key Performance Indicators (KPIs) in real time. This, in turn, empowers finance leaders and their teams to make swift, data-driven decisions, unlocking hidden growth and profit opportunities. Introducing automated cash application software means less errors in processing payments and increasing accuracy of data.

Providing your accounting department with the tools to effortlessly match payments to the correct customer invoices will allow them to focus on more value-added activities. In an article from Business Insider, 49% of office employees reported that they were unable to leave the workplace on time because of the hassle of everyday administrative tasks. Redundant manual entry tasks, like AR payment matching, lead to wasted employee hours and can be easily substituted for more efficient automated options.

An integrated cash application solution also enhances customer experience by providing customers with faster updates on their financial accounts with your company. The step of manually linking payments to their corresponding remittance information can take a long time, especially when dealing with a large volume of transactions. Learn what cash application is, how to accelerate cash flow with AI and advanced automation, and how to make matching payments with open receivables simple.

Advanced automation in cash application—This has becomeincreasingly sophisticated, using modern technologies such asrobotic process automation (RPA), artificial intelligence (AI), andother machine learning capabilities. These delays can make it more difficult to get an up-to-date and precise view of your receivables, making it harder to determine which accounts genuinely have overdue payments and which are yet to have their payments processed. This creates a domino effect resulting in an inaccurate overview of your accounts and overall business revenue. By this point, the AR team should have an accurate position of any outstanding payments overview, any ageing debt, as well as payments collected, and the cash position of the business at that time. Where a short payment is received, cash application specialists must provide a reason for the short payment and record this under a specific code.