Cash Application Done Right: More Sleep at Quarter-End

Introduction

One more quarter is ending and your controller needs you to reconcile all payments, the worst part, you can’t spend time with your family during the Easter holiday! Cash application does not need to cause you to lose sleep, and miss out on time with your family at quarter-end. Do not accept cash application headaches that prohibit your company from discovering best practices and cost-effective technology that can offer relief from even the worst cash application headaches.

Many companies fail to achieve cash application efficiency because of a belief in one or more of the 7 common cash application myths depicted in Figure 1.

I recently had the pleasure of moderating a webinar on which Raj Samal, Senior Solutions Principal, HighRadius dispelled each of these 7 myths:

Myth 1- Lockbox Services are necessary for check payments

• Automation reduces data capture costs
• Remote Deposit Capture (RDC) automates check payment processing
•  Artificial Intelligence (AI) based Optical character Recognition (OCR) engines are better alternatives

Myth 2- Electronic payments are easy to process

• Companies receive decoupled payments and remittance information
• Companies receive remittance information in many formats from many external data sources
• E-payment application is complex and labor-intensive

Myth 3- Impossible to automate cash application with non-standardized remittance information

• Artificial Intelligence enabled automation captures remittance data from checks, emails, websites, customer portals, and EDI files.
• With an AI + RPA enabled solution, remittance capture is easily automated

Myth 4- We have achieved straight-through processing

• Header-Level Hit Rate (a payment is matched with the right customer account) does not give an accurate measure of straight-through processing.
• Straight-through processing success should be measured by the Invoice Level Hit Rate (ILHR). LHR means the payment is matched with the customer account and corresponding invoice and achieves invoice/item level posting

Myth 5- We already have a great solution in place

A great solution means:

• Same-day cash application
• Cash application is not labor-intensive
• No negative impact on downstream accounts receivable processes (collections, deduction coding, discount handling)
• Scalability

Myth 6- It is better to invest in other areas of accounts receivable operations

Cash application is low-hanging fruit:

•  Immediate hard cost-savings (cost per check processed, cost per cash application personnel)
• Meaningful ROI (lower costs, improved cash flow, employee productivity improvements)
•  Resource optimization for other strategic processes (automation with a 90% hit rate eliminates the cash application labor requirement by 90%).

Myth 7- Automation means expensive, on-premise systems

• On-premise systems are not the only option
• Easy to deploy cloud solutions with no upfront fees can be used for automation

It is time for finance leaders to separate cash application myths from reality. Efficient cash application delivers strategic value. Cash application done right improves working capital management, improves customer relationships, and impacts the productivity of employees involved in the cash application process.

If you want to learn more about why the 7 myths of cash application are just that, experience the recording of the webinar Cash Application: Turning a Nightmare into a Dream and visit HighRadius to discover how they work with companies to achieve 9%% zero-touch cash posting across ACH, checks, credit cards and other e-Payments.