Cash APplication Best Practices: The Risks Of Not Using Software
Cash Application Best Practice
Without proper cash application and reconciliation procedures, organizations struggle to stay on top of receivables and maintain their cash flow. While it is possible to manually track, reconcile, post and match payments and invoices, this approach to order-to-cash processes is fraught with risks. From mistakes and mis-postings to inconsistent processes and excessive time drains, the cost of not using software for cash application can be significant for even the most financially astute organizations.
Time-Consuming, Costly, and Inaccurate
Manual cash application is, quite frankly, an outdated version of cash management that requires significant amount of time and resources, while increasing the potential for costly errors and missteps. Based on the organizations size, the number of invoices sent, and the number of payments received, manually applying cash can be time-consuming and labor-intensive process. Typically, it requires team members to manually review and reconcile every invoice and payment, process that can take hours–if not days or weeks–to complete. Further, manual cash application leads to an increased risk of invoice payment misclassifications and incorrect cash postings.
Inconsistent Processes and Auditing Challenges
Manual cash application also creates inconsistencies that can be difficult to track and audit. This can result in discrepancies, discrepancies going undetected for too long, and lack of visibility into how and why payments were applied. On the flip side, automated systems allow for organizational controls, pre-defined rules and regulations, and the ability to audit and review the system?s methodology at any given time.
Lack of Insights
Organizations relying solely on manual cash application often lack the data they need to identify opportunities to improve the cash flow. Without software, they are unable to generate insightful reports, capture customer payment data, or proactively monitor and prevent potential issues, such as payment disputes, customer credit holds, and duplicate payments. They also lack the real-time accuracy and visibility needed to make informed financial decisions.
The Benefits of Cash Application Software
it is clear that cash application software has many advantages when it comes to managing customer payments and the accounts receivable process. An automated solution helps organizations reduce the risk of errors, save time and money, and achieve visibility of daily functions. With the ability to automate manual processes, interpret data, and generate reports, organizations can streamline the cash application process and ensure accuracy. Additionally, if the solution is integrated into the order-to-cash process, customers will benefit from better customerservice and shorter cycle times.
To ensure that organizations are able to effectively manage customer receivables and maximize their cash flow, it is essential to invest in cash application software. The risks associated with not using the right software far outweigh any nuances or processes managed manually. By leveraging the power of cash application software, organizations can take control of their operations, streamline customer payments, and pave the way for increased efficiency and improved customerservice.
