Optimizing The Order To Cash Process Through Cash APplication
WHAT IS THE CASH APPLICATION PROCESS
In the ultra-competitive current market environment, it is paramount to achieve efficiency and accuracy in the order to cash process. Organizations that do not optimize their process are likely to be hindered in their capacity to finance operations, sustain growth, and gain competitive edge. Cash application is one of the most important steps in the order to cash cycle, reducing costs, maximizing efficiency and accuracy and providing visibility into the financial supply chain.
Cash application forms part of the overall process of accounts receivable automation, digital transformation that allows for the efficient management of customer billing and accounts receivable. The goal of accounts receivable automation is to speed up creditors’ payments, build customer loyalty and go beyond simple collection processes to ensure that cash is optimally managed. Top of the line accounts receivable automation software helps with this by automating key steps such as cash application.
When assessing how to optimize cash application, the finance executive needs to consider various criteria. The criteria will vary for each organization, depending on the size, industry and unique financial needs.
First, automated matching programs should be evaluated. Automated matching streamlines the physical effort required to apply payments to accounts receivable invoices, allowing organizations to reduce errors and inefficiencies caused by manual efforts. Matching programs should be capable of reconciling different payment types, including credit cards and ACH payments, and should to be able to meet multi-language requirements. Furthermore, it ishould be able to facilitate effective communication between disparate systems and with trading partners.
Obsolescence management is second essential component. While it is important to have robust automated matching system, it is even more important to ensure that no payments are missed. By utilizing technology such as optical character recognition to continually refine and improve the payment application process, any unapplied payments can be identified in the most efficient manner.
Another critical aspect of order to cash automation is reporting and analytics. Payment visibility is paramount, and any top of the line software should generate reports to track the progress, point out issues and help to identify trends. The software should be able to offer real-time informational displays on the status of customer’s accounts receivable, current cash posting cycles and anomalies, when payments have cleared and any applicable variances.
Finally, organizations should evaluate how the order to cash process works end-to-end. Great software should be capable of integrating with existing solutions, leveraging data from electronic invoices, electronic payments and bank statements. This type of software should be the only aspect that is needed, therefore reducing operational costs and IT resource utilisation.
Clearly there are many components to consider when evaluating how to optimize the order to cash process through cash application. By considering these criteria and assessing the integration, payment management and analytics capabilities of the different software solutions, the finance executive can choose the best option for their organization. This is the route to take towards reducing costs, efficiently managing cash and obtaining valuable insight into the financial supply chain.
