Understanding The Risk Of Not Automating Cash APplication
AUTOMATED REMITTANCE IN CASH APPLICATION
The order to cash process is critical part of any business dealing in products and services, involving the receipt of payment from customers after they have ordered and received goods or services. When payments are not automated, there is high risk of lost revenue, diminished cash flow, and human error. The right software solution put in place to streamline and manage the order to cash process can result in liquidity, while the costs of the errors resulting from an overreliance on manual processes can be exorbitant.
For the finance executive responsible for the order to cash process, manually managing the receipt of payments can be an onerous task with range of significant risks. First and foremost, there is the risk of human error. If manual processes are employed for cash application tasks, basic human mistakes can be frequently seen. Checks can be misapplied to the wrong customers, incorrectly scan, or wrongly initiated. This can result in lost revenue, discarded payments, or untimely payments from customers, all of which are damaging to business.
The costs of the manual processes often incurred in manual cash application can also be expensive. It requires considerable amount of time and resources to manually collect and account for payments, which can result in costly losses for the organization. Without the ability to process payments efficiently, the organization may find its revenues delayed, reducing the amount of liquid funds in the organization. Additionally, if manual processes are used, manual payment tracking may be necessary, leading to higher costs associated with invoice reconciliation, owed payments, or discrepancies in payment figures.
Furthermore, manual processes can also lead to what is known as ?zombie debt? where payments are taken from customers, but not tracked through the order to cash process. This can lead to inevitable discrepancies between what the customer owes and what the organization perceives it is owed, costing the organization its hard-earned revenue.
By automating the cash application process, organizations can mitigate the risks of relying on manual processes. Automated cash management software provides an accurate and efficient means of collecting and tracking customer payments. Automated software that is integrated with companies system of record can enable payments to be assigned to the right customer, while simultaneously receiving and accounting for payments in real time. As result, any potential issues due to misapplication of payments or delays in collection can be avoided.
Additionally, cash management software can provide organizations with greater visibility over their customer accounts, enabling faster collection of payments by providing real-time updates on customer payment activities. This means that companies can maximize their cash flow by capturing customer payments as quickly as possible.
An automated cash application solution can also enable organizations to create flexible payment schedules that reflect organisational needs, resulting in better customer experience. Many automated payment platforms also optimize payment schedule accuracy, by analyzing customer data and constructing schedules that reflect customer needs.
In conclusion, automated cash application solutions can be critical tool for finance executives looking to reduce the risks associated with manual cash application processes. Automated cash management systems can minimize errors, optimize cash flow, and enhance customer engagement, resulting in greater efficiency and liquidity for the organization.
