Maximizing Accounts Receivable Cash APplication With Order To Cash Solutions
Accounts Receivable Cash Application
Conventional accounts receivable (AR) process flow forces many companies to observe out-dated approaches to cash management. As result, these companies incur significant costs on traditional receivables reconciliation, account analysis, and credit management. By exploring the various options suggested through capital markets, companies can potentially reduce the losses associated with manual processes and increase profitability.
Accounts receivable cash application is an integral part of the Order to Cash (OTC) solutions that emphasizes the collection of customer payments and fully deploys cash to the client’s financial books. successful implementation of an OTC solution can significantly reduce the time required to complete receivables management tasks. Moreover, OTC solutions provide better visibility into invoicing by improving data accuracy, greater visibility into cash flows, and enable customers to receive payments quickly and in timely manner.
This article provides an overview of the Order to Cash solution and step-by-step instructions on how to maximize the potential of accounts receivable cash application.
What is Order to Cash?
Order to Cash is holistic process that encompasses every phase of the customersupplier relationship. It includes ordering, fulfillment, payment, and cash collection. OTC is essentially tool that helps business to streamline their financial processes and turn older, manual accounts receivable tasks into automated and coordinated functions.
The OTC process begins with ordering. When customers place an order, they input all their payment details and requirements into the OTC solution. This information is then sent downstream to the supplier, who begins the process of fulfilling the order and delivering the goods to the customers doorstep. Once the customer has received the order, they will then submit their payment to the supplier. The OTC solution then enables the supplier to process the payment and reconcile the accounts receivable. Finally, the supplier can collect their cash and deposit it into their bank accounts.
By optimizing their payment operations, business are able to better manage the collection of customer payments and improve the security and accuracy of their data. This significantly decreases the time required to complete manual tasks and improves cash flow.
How to Maximize Accounts Receivable Cash Application Using Order to Cash Solutions
Step 1: Set up the AR System
The first step towards maximizing receivable cash application is to set up the AR system. The OTC solution should be configured to ensure streamlined payment process between the supplier and customer. This includes configuring the system to read customer payment information, process payments, and reconcile invoices.
Step 2: Automate Payment Reminders
Once the AR system is configured, the supplier will then need to set up automated payment reminders. Automated payment reminders enable the supplier to remind customers of upcoming payment deadlines, allowing them to receive their payments in timely manner. Automated payment reminders also reduce the need for manual intervention, as the reminders can be sent out directly to the customers email address.
Step 3: Utilize Automated Reconciliation
After setting up automated payment reminders, the supplier will then need to utilize automated reconciliation. This involves the process of reconciling customer invoices with supplier accounts. By leveraging combination of advanced algorithms and machine learning, suppliers can quickly reconcile account data and ensure that customer payments are always reconciled with their accounts.
Step 4: Integrate with the Bank
Finally, the OTC solution should be integrated with the supplier’s bank account. This allows the supplier to easily collect payments from the customers account and transfer it to their own accounts.
Conclusion
Accounts receivable cash application enables companies to reduce the losses associated with manual processes and increase their overall profitability. By utilizing an Order to Cash solution, companies can streamline their financial processes and ensure seamless flow of customer payments and collections. Implementing the above steps will ensure that companies maximize the potential of accounts receivable cash application and experience greater success with their Order to Cash systems.
