Improving Cash APplication Processes With Automation
Accelerate Cash Application
Organizations must ensure that the invoice-to-cash process is efficient and reliable to ensure the viability of their recordkeeping and profits. Though manual processes are still widely used, they are often time-consuming and prone to human error, resulting in delays in reconciliation and disputes. Automating the cash application process with an order-to-cash (OTC) solution provides holistic, user-friendly platform that adds speed and accuracy to the invoice-to-cash process.
Benefits of Automated Cash Application
Automated cash application technology increases cash flow predictability and gives business an unprecedented level of visibility into the process. It allows organizations to gain greater insights into their accounts receivable (A/R) as well as more accurate data from which to make informed business decisions. Automation also streamlines overall operations, reduces personnel costs, and minimizes manual errors in data entry.
Overview of Automated Cash Application Process
The automated cash application process begins with the acceptance of payments or the balancing of communication data. This can be done by leveraging the Electronic Data Interchange (EDI) to communicate data or built-in web portal that facilitates easy customer access. Furthermore, payments made via credit card or other third-party payment methods are processed as part of the cash application process. Once the payment is accepted and the data is balanced, the OTC software automatically initiates the cash application process.
This process creates cash receipts that post straight to the general ledger (GL) to ensure complete and accurate accounting of the A/R data. The receipts are linked to the customer account, and the payment information is verified on the relevant customer invoices. It is important to note that the automated cash application system should be designed to accommodate any payment type, including cash payments.
Matching and Allocation of Payments
The next step in the automated cash application process is to match and allocate the payment to the corresponding invoices. The system can either match the payment to the correct invoices with invoice numbers and customer information or, if there is discrepancy, the accounts receivable personnel can manually match the payment to the invoiced due. Where the payment amount exceeds the invoiced amount, the excess payment is allocated across the customers invoices.
Creating, Metering, and Other Automation Capabilities
The OTC Software will create and post cash receipts to the GL as part of the automated cash application process. Customers and accounts receivable personnel can access the cash receipt details via the customer or accounts receivable portals, respectively. Furthermore, customers can also take advantage of metering capabilities and view the payment status of their invoices and account balances in real-time.
Payment Confirmation
Once the automated cash application process is completed, the payment is confirmed and distributed to the appropriate customer invoices. Any discrepancies (if any) can be easily addressed with click of button, greatly reducing the risk of incorrect payment entry or missed reconciliations. Customers can also receive generated payment confirmation document that provides an overview of their cash application progress.
Conclusion
Automating the cash application process with an OTC Solution reduces the risks associated with manual processes and speeds up the invoicing, payment, and reconciliation process. An automated cash application solution helps to streamline operations, increase visibility, reduce costs, and decrease human errors. It is therefore essential for organizations to invest in an OTC solution that integrates all aspects of the cash application process (from data matching to payments) to gain the optimal efficiency and accuracy.
