Risks Of Neglecting Cash APplication In Accounts Receivable Software


Accounts receivable software plays central role in any finance executive’s operations. This technology tracks the money coming into an organization, enabling tracking of all invoices and their associated payments. Automated cash application is an integral component of the process, with many potential advantages. However, there are risks finance executive should consider when neglecting this feature of an order to cash system.

By not engaging in automated cash application, the implications for an organizations bottom line can be significant. The scope of risk extends beyond just missed payments and incorrect account balances. Neglecting to utilize this feature can threaten successful financial system operations and compliance requirements.

Leading accounts receivable software streamlines cash application by automatically integrating and updating invoice and payment records without manual data entry. This is great benefit to business, especially if there is talk of increased sales volume. When providers issue prepayment, it increases the risk of overlooking certain payments and the details behind each invoice. Automating this process, in comparison to the rudimentary manual entry process, is much more efficient and reduces the chance of making inaccurate or incomplete cash application entries.

Inaccurate applications can result in lost cash flow due to delayed payment and reconciliation of incorrect invoices. This is especially true when dealing with large volumes of data, such as is often encountered when fulfilling high volume order. Incorrectly matched transactions can also create confusion with the customer, resulting in negative customer experience and the potential loss of business.

Ignoring automated cash application also can lead to regulatory compliance issues. Without the ability to properly match payments to invoices and credit customers in timely manner, IRS and other key financial statutory payments can be delayed and result in system overload and non-compliance with industry standards. Non-compliance with financial regulations can lead to fines and penalties that can greatly impact business? bottom line.

There is strong argument to be made that software-driven account reconciliation is well worth the relative small expense. An automated system reduces the risks of errors and increases the speed and accuracy of data matching, while saving time and money in the long run.

A well-designed automated cash application system, integrated with an order to cash software solution, can help businesses improve their bottom line, ensure data accuracy, keep customers happy and secure compliance. Those dedicated to risk management and operational efficiency must remember automated cash application is key component of the overall accounts receivable process that should never be overlooked.