Improving Your Order To Cash Solution Through Automated Cash APplication
Cash Application Process.
The world of finance is rapidly changing as new technologies and options are becoming increasingly widely available for business? use. One of the most quickly evolving and innovative areas of financial software is Order to Cash (OTC) Solutions. These solutions automate number of complex processes, ultimately reducing risk and lowering the cost of operations.
An often overlooked, yet still critical, component to any effective OTC solution is cash application. Cash application is the process of allocating incoming payments to the right invoice. This can be particularly challenging task, due to the effort and manual work required to reconcile payments. To accurately identify which payment relates to which invoice, careful examination of the payer?s information need to cross referenced with the corresponding invoice data. Doing this manually is time consuming and prone to errors that can be expensive and embarrassing to business.
Fortunately, OTC Solutions exist that offer advanced cash application capabilities. Utilising these solutions enables organisations to quickly match payments to invoices in an automated way. This routine alleviates the issues associated with manual data entry and reconciliation processes, freeing up business? resources to focus on supporting higher value tasks.
This guide will provide an insight into how automated cash application capabilities can benefit your organisation?s OTC solution and demonstrate the steps involved in setting up such solution.
Step 1: Account Setup
The first step in configuring cash application solution is to create an account in the OTC solution. Depending on your preferences, this process might involve setting up an online account, or it could involve connecting to existing accounts, such as those commonly used for bank transfers or invoicing. Setting up an account may also require inputting preferences, such as payment terms and credit limit, providing further information regarding currency, and specifying the method of payment.
Step 2:Input Payment and Invoice Data
Once the account is setup, business can then move onto inputting payment and invoice data. This process will require inputting both payment and invoice data into the OTC solution. Payment data should include payer?s details, such as bank information, date of payment and any reference numbers, as well as any credit memos, returns or promotions whose value needs to be allocated. For invoices, you should include the deductible invoice amount, and any tax information.
Step3: Match and Identify Data
Once the payment and invoice data has been input and saved, the OTC solution will then begin to match and identify the data. This involves matching data points, such as payer information, currency and amount to identify the matching invoices. This automated matching can be further customised to the business? preferences. The payment amount is then split and allocated to any invoices or deductions through the credit note, returns or other promotional offers.
Step 4: Allocate Relevant Payments
The data that has been matched and identified is then sent to the business? accounting platform to apply the payments to the relevant invoices. This process helps to reduce the risk and cost of manual interventions. Payment apps even allow banks to be reconciled directly with the accounting database, further eliminating the risk of manual errors.
Step 5: Set Up Monitoring Process
The final stage of the process is ensuring that the cash application process works correctly, reliably and without the non-value-adding manual activities. This means setting up processes to monitor the cash application, so that issues or anomalies can be identified immediately. Banks or customers can also be notified of any payments or credits allocated.
Conclusion
Cash application is complex yet important financial process that is often overlooked when evaluating OTC Solutions. By understanding how automated cash application works and the significant benefits it can offer, organisations can be confident in their choice of OTC Solution and the supporting cash application capabilities.
