Order To Cash Solution: An Introduction To Cash APplication In Accounts Receivable
WHAT IS CASH APPLICATION IN ACCOUNTS RECEIVABLE
Professionals working in the finance department have long been looking to streamline their order to cash process. With that in mind, the introduction of cash application in accounts receivable (AR) offers tremendous opportunities to improve order to cash speed while reducing reconciliation efforts and enabling more efficient cash flow management.
This guide is intended to provide C-Suite executives with an overview of the benefits associated with cash application in AR and step-by-step guide to leveraging this integrative technology.
The Basics of Cash Application
Cash application is an automated process for validating payments, adjusting customer accounts, and reconciling all necessary accounts that allow for the successful payment of customer invoices. It typically integrates with an ERP/GL system, sales order processing system, and accounts receivable system to enable all necessary documentation and filings. This may include credit cards, wire transfers, direct debits, and bank-initiated debits/credits.
Thanks to its automated components, this process reduces the time and manual effort required to process large volumes of customer payments and typically provides much greater degree of accuracy.
Benefits of Cash Application AR for C-Suite Executives
Cash application AR provides powerful benefits to all participants in the accounts receivable process. For executives, the primary advantage is the ability to reduce the manual effort required to validate, adjust, and reconcile customer payments since the technology handles many of those functions. Moreover, this automation capabilities also enable staff to recognize, transpose, and post payments faster, giving the executives improved cash flow and higher visibility while providing customers with superior customer service.
The technology also enables executives to gain improved control over receivables. Integration with accounts receivable and GL systems can simplify the reconciliation process and improve the accuracy of payment postings.
The Step-by-Step Guide to Leveraging Cash Application in AR
Step 1: Choose the right order to cash system
The first step to leveraging the order to cash process is selecting the right system. There are many order to cash systems available, and they will vary in features, complexity, and price. When selecting, consider the size of your enterprise and the features you need, such as consolidated customer database, detailed AR account statements, automated collections processes, and sophisticated analytics.
Step 2: Set up and configure the application
Once system has been selected and purchased, the next step is to set up and configure the application. This includes creating customer database, setting up banking accounts, and mapping out invoice flows. Mapping out the flows will help ensure that customer payments are allocated quickly and accurately.
Step 3: Configure the customer aftersale process
Once the order to cash system is set up, the customer aftersale process needs to be configured. This includes defining customer payment methods and terms, setting up automated payment reminders, and setting up payment monitoring tools such as dunning notification emails.
Step 4: Create integration and security protocols
Integration protocols between the order to cash system and other systems such as accounts receivable, GL, and payroll should be established. These protocols should be written up and documented to ensure that the data is accurate and secure.
Step 5: Train staff
Once the order to cash system is set up, staff should be trained on how to use the system and how to manage customer payments. Training should cover the best practices for monitoring customer payment terms, sending out payment reminders, and reconciling payments.
Step 6: Implement Document Capture features
Once staff are trained on the system, the next step is to implement document capture features. This includes implementing scanning software to capture documents like invoices, orders, and purchase orders and integrating those documents into the order to cash system for enhanced automation.
Conclusion
By leveraging the power of cash application in AR, executives can streamline order to cash process and reap powerful rewards. This guide provides comprehensive overview of the opportunities available with this technology as well as detailed instructions on how to set up and configure cash application AR. By following these steps, C-Suite executives can ensure that their accounts receivable processes are as efficient and reliable as possible.
