In many companies there is still a lot of manual processing required to match the incoming payments with open items in their accounts receivable. This is always a tedious and laborious process, independent of the industry you are in. A common strategy for companies is to offshore these activities in order to benefit from lower labor costs. However, this is a suboptimal strategy. A much better solution is to automate the entire process.
Solutions to achieve high automation rates have been around for a long time, and in that sense they are nowhere near cutting-edge. But, that doesn’t make them less effective. Automatic application rates of 80% or higher are very realistic to expect, independent of your industry or the countries you operate in. It’s even independent of the way you receive your payment information, be it as bank statements, remittance advices, lockboxes or industry-specific payment files.
So, what do you gain from such a solution? First of all, a much higher productivity at significantly lower cost. It’s not uncommon to see a reduction of 50% or more in the cost of the cash application process. This is mostly due to the higher automation rates, but also due to the higher quality of the entire process. Since the process is less labor intensive, it is also less sensitive to human error. That means that you are spending less time on correcting errors and less time on chasing clients who already paid their invoices. This last point, of course, also contributes to the professional appearance of your company and avoids a negative influence on your image. Finally, because the cash application team can spend their time on the more challenging payments; that is the few remaining payments that could not be applied automatically, they will find their job more rewarding leading to higher job satisfaction.
If you recognize the above situation it would be a good decision to put emphasis on reviewing your current cash application process and look for a solution to help you achieve your goals of increasing productivity and efficiency.