The cash application process is highly manual, time-consuming, costly, and error-prone. Companies receive many forms of payment (check, ACH, wire transfer) across multiple lockboxes or banks and customers often provide inconsistent remittance detail in a variety of formats (paper, EDI, email attachments, online portals). On top of this inefficiency, the cost of paying the bank to key in data from paper remittances can be very high and only partially address the problem.  Also, as you know, remittance line items can sometimes refer to alternative reference numbers that are not on the original invoice.

Audit and compliance issues arise when a company is sitting on unapplied or improperly applied cash, making accuracy and efficiency all the more critical.  Knowing all of this, the Encyclopedia of Credit, offers 10 tips/benefits on automatically applying cash:

  1. The use of automating cash application software to process customer payments enables the cash application team to perform higher value-added functions.
  2. A 50% auto cash processing rate would be considered low.
  3. With effort, automating cash rates can climb to 90% or higher.
  4. One benefit is that much of the drudgery of cash application can be eliminated using auto cash.
  5. Automating cash both simplifies and dramatically accelerates the cash posting process, making possible better credit decisions based on more current information.
  6. Another benefit of automating cash application is that this automation process should result in cost savings including the possibility of headcount reductions in cash application.
  7. Automating cash enables cash application personnel to focus on higher value activities such as addressing disputes and deductions more quickly.
  8. The benefits of automating cash include the fact that by using auto cash, the cash application handles only exceptions. An exception is a payment that did not post automatically.
  9. Understanding why certain customers payments cannot be matched means that the cash application team can either (a) change their system to improve its auto cash hit rate, or (b) discuss with customers specific changes that would result in a higher auto cash rate.
  10. This is proven technology. It is nowhere near the leading edge.

Learn how Reckitt Benckiser increased their on-invoice hit rate to 98.5% by watching the recorded webinar on, “Cash Application Case Study”.