25/01/2016 - Alexis van Audenhove, Sales Manager France, Hanse Orga

A true goldmine for cash application

Most of the leading corporates have several characteristics in common. They are international, efficient, automated, ERP enabled, and always on the look-out for value-adding technologies. One area in which significant efficiency gains could be realized, but which lie dormant in many cases, is cash application.

Surprisingly, manual processes still dominate in the reconciliation management of many corporates, although process optimization would be particularly easy to achieve in this area. So, this blog post is for all those companies, shared services managers, finance managers and order-to-cash managers that still have a largely manual cash application process in place and who would like to enhance their accounts receivable processing.

Now the BIG question is: “How can I automate my cash application?”

The answer is rather simple: By using the payment information sent by your customer to a much higher degree. Naturally, this kind of information comes from two different sources:

  • Bank statements: the note to payee where your customer can indicate the invoice(s) numbers and other relevant information
  • The remittance advices that provide additional information on invoices and amounts paid.

What is a remittance advice?
“A remittance advice is a note sent from a customer to their supplier, informing the supplier that they have paid their invoice. The advice may contain elements such as a text note, the invoice number and the invoice amount, among others.” *

As you are surely aware, a remittance advice is a goldmine of information. They come in different shapes and formats (e-mail, pdf, word, excel, image, scan, portal, paper, etc…) and their content and quality will inevitably vary. Despite that, it’s probably good to remember that a remittance advice is a courtesy from your client, making it easier for you to match payments with invoices.

Furthermore, modern remittance advices can include dozens or hundreds of invoice numbers, as well as other detailed information. Dealing with them manually would be way too time consuming and would impact negatively on the level of efficiency.
How to use this goldmine?
There are a few solutions on the market that can automate the cash application of your hundreds/thousands of remittance advices, including the handling of more complex situations such as deductions, discounts, bulk payments, and so on. Basically, those solutions will use the valuable information in the remittance advices of your customers to match your bank account statement with the open items in your accounting. 
What are the 5 big advantages of a cash application solution?
Naturally, the most important one is that the entire process is much more efficient, saving time and cost. Secondly, it leads to a higher quality process. By automating and standardizing the process the room for human error is reduced to a minimum. Thirdly, matching rates of 80% or higher are the rule rather than the exception. It leads to a situation in which your teams can focus their attention on credit and dispute management, rather than on simply applying cash. A fourth effect is that the amount of unapplied cash tends to decline, leading to a lower DSO, while at the same time – which is the fifth big advantage – reducing the chance of auditors earmarking unpaid bills as ‘bad debts’.

Don’t wait to grasp this opportunity, and start mining the gold today!





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