Financial Transformation: A Comprehensive Guide To Implementing A Cash APplication Solution For Accounts Receivable

Cash Application Solution For Accounts Receivable

For todays finance executives, the challenge to accelerate financial transformation is critical. The main goal for successful transformation is to achieve steady Cash flow, at the same time ensuring compliance and growth. One of the most successful transformations of this kind is the implementation of cash application solution for accounts receivable. It is important to note that an effective cash application solution must adhere to the four principles of finance automation: accuracy, efficiency, cost reduction, and compliance.

Our goal with this guide is to provide C-Suite Executives with an overview of the cash application solution process. We will discuss the nuances of the solution, including the types of accounts receivable collections procedures, the various data sources to employ, the most suitable applications on the market, the central system of record to integrate, and the essential workflows that must accompany each setup.

Types of Accounts Receivable Collections ProceduresThe first step for cash application solution for accounts receivable is to properly categorize each collection type. This is necessary in order to ensure that each invoice is properly matched and deposited. There are generally three main types of collection procedures: bank deposits, cheques, and credit card payments. The bank deposits refer to all cash that has been deposited directly into customers bank account. Cheques are physical documents and include any money order, demand drafts, and post-dated cheques. Lastly, credit card payments are the payments carried out through credit or debit cards.

Data SourcesThe second element to consider when establishing cash application solution is the data sources. In order to utilize the solution successfully, multiple data sources need to be in place. The primary source should be the customer invoice, which will provide all the necessary information needed on the customer, payment amounts, and due dates. In addition, other sources such as bank feeds, list of invoices and corresponding payments, and receipts can all be used to enrich the customer invoice data.

ApplicationsThe third step towards establishing successful cash application solution is having the right applications in place. The applications should be customizable and easily adjust to the various payment instruments. Most commonly, payments are received from clients via Electronic Fund Transfer (EFT), Automated Clearing House (ACH), Payment Network (PN), or Credit Card Network (CCN). Therefore, having applications that can handle such wide variety of payment systems is necessary for successful cash application.

The Central System of RecordIn order to ensure accuracy and transparency, centralized system of record should be established. This central record of customer invoices and payments will be used to document the process and ensure accuracy throughout the process. Utilizing system of record is essential as it provides clear and comprehensive view into the financial health of the organization.

WorkflowsThe fourth and final element of the cash application solution is having reliable and comprehensive workflow processes in place. Establishing an appropriate workflow for each step of cash application is necessary for proper monitoring and tracking of the progress. This includes having automated alerts for any discrepancies or issues that arise, ensuring that invoices are processed in timely manner, monitoring for payments that may have gone unapplied, and providing accurate customerstatus updates.

ConclusionA cash application solution for accounts receivable is critical step towards achieving successful financial transformation. The solution must adhere to the four principles of finance automation in order to ensure accuracy, efficiency, cost reduction, and compliance. The cash application solution process involves the categorization of collection types, the use of multiple data sources to enrich the customer invoices, the selection of the most suitable applications, the integration of centralized system of record, and the establishment of reliable and comprehensive workflow processes. Implementing such solution is key in achieving stable and secure financial environment.