Cash application takes too long, costs too much, creates too many exceptions, and provides inadequate visibility.
Forty-three percent of businesses surveyed by the Institute of Finance and Management (IOFM) describe their cash application process as inefficient. Twenty-five percent of businesses say cash application costs too much. Moreover, less than half of all billers can post their receivables straight-through.
It is no wonder that 60 percent of billers are dissatisfied with their receivables processes, per Aite Group.
The root of the cash-application problem is the antiquated systems and processes that most accounts receivables departments use to apply cash. These are the “old rules” of cash application:
- Payments and remittances are received by the biller and/or its lockbox provider
- The lockbox provider forwards payment information to the biller
- The biller then captures and aggregates remittance information
- Once the payment and remittance information is captured and aggregated, the biller must link the remittances and payments and match the remittances with open invoices
- A receivables file is then uploaded to the ERP
For most billers, each step of this process requires a significant amount of manual effort and time, and introduces opportunities for error.
Worse yet: the combination of diversifying payment and remittance channels, ever-increasing demands for remittance data capture, and the heightened audit and compliance risk of unapplied or improperly applied cash will exacerbate the problem for receivables departments that do not act soon.
Paying a bank lockbox provider to capture remittance data is no panacea. And bolting-on an optical character recognition (OCR) solution to fragmented legacy systems provides uneven results.
The solution is to change the rules of cash application.
Integrated receivables solutions accelerate the application of cash and payment information, while empowering billers to make analytical inferences about payments. The technology accomplishes this by:
- Aggregating payments and their remittance details
- Assisting with discount/deduction management
- Providing consolidated reporting and accounts receivable feeds
- Automating the consolidation of internal and external data sources
- Providing trends analysis
Changing the rules of cash application empowers billers to reduce Days Sales Outstanding (DSO), simplify receivables information management, reduce unauthorized client deductions, achieve near real-time insights into transactions across all payment channels, and drive data analytics.
Want to change the rules of cash application in your organization?
Arrange for a no-obligation online demonstration of Creditron’s integrated receivables solution by contacting Mike Dignen at email@example.com.
You also can register for an IOFM sponsored webinar on this topic scheduled for March 1st by clicking here: http://bit.ly/2kxFyZy