For those who deal with cash applications on a daily basis, it may be quite clear what a cash application is and why it is important, but for those who don’t know what a cash application is, it can be a little difficult to fully understand why it is.
very important. Although it may seem simple at first, there are many complex uses. For those who have questions, we will try to answer what is the money app, how to do it, why it is complicated and why some of them are important.
In commercial transactions, the flow of goods and services often does not wait for payments to be processed. When the relationship between two wealthy companies is stable, their accounts are deemed sufficient to cover regular service exchanges. However, these agreements make billing more complex than business-to-consumer exchanges due to delays in transaction periods and unclear and unpredictable cash offers.
For consumers, their payments are challenged and, if approved, orders and payments are made simultaneously. With B2B services, orders / invoices are placed and payments often come later. This means that the payment must be compared with your invoice and processed after.
Cash Application Definition
Cash Application is part of the Accounts receivable A/R process, where incoming payments are applied to the correct customer account and claim invoice. To do this, you must first determine where the payment will be applied. This is usually done by comparing the payment to the related invoice.
If for any reason the payment cannot be properly matched with the related invoice, the payment will be reconciled with the customer at the customer account level. Once this is done, payments can be applied to reduce A/R. It seems simple enough so let’s move on to filing for cash.
How To Do Cash Application?
The use of cash is one of the most important components of any claims process. At the highest level, there are two ways in which money can be requested manually or automatically. A cash application specialist is involved in manual processing, going through related payments and transfers, and comparing the payment amount with the associated invoice.
The cash application specialist checks the customer’s name or payment invoice number, finds relevant transfers, and posts them to his company’s ERP invoice for unpaid receivables. The automated cash application process goes through the same process, but can combine payments and money transfers with a faster mandatory speed.
As the cash application process becomes more complex, many companies are turning to automated processes as it reduces the workload for employees to cut costs, burn jobs, and apply for money becomes increasingly important.
What makes a Cash Application Complex?
Before there were simple e-banking and remote business methods in the “digital age”, applying for cash was quite simple. Orders are entered and recorded, followed by a check for the invoice amount. The accountant’s remaining job is to match the names and number of customers on the order with a check to confirm the correctness of the transaction, and finally cash the check to put the proceeds into a commercial bank account.
There are now dozens of ways to place an order, from e-invoicing to digital payment portals to your own B2B application.
Payments can also be made via traditional locking services, checks, bank transfers, ACH and personal cards, all of which have to be compared with orders from multiple sources. To complicate the process further, a single invoice is usually sent for multiple orders, which denies easy comparisons of amounts.
Due to the fact that payments usually do not match the invoice or total amount due on account and are received at different times of the month, the AR team is prevented from making daily compensation payments, which is an incredible amount of manual and tedious work created for members/teams.
Why is cash application important?
Cash applications are the key to having predictable and stable cash flow and making all management system operators comfortable. Simply put, if you don’t have it, you can’t spend it.
Without control over cash flow, you will be faced with it. To make a profit, companies need to use their money as efficiently as possible. However, this would not be possible if money was tight at the time of publication.
Orders and payments waiting to be “executed” are of no use to anyone. If a company is paid but is awaiting cash application, it is still basically collateral for debt as it cannot be used or invested in replacement.
Finance can’t even say they have a solid picture of the fund at the moment because payments are waiting to be processed. The sooner you apply for cash, the sooner it can be spent on something meaningful and / or time sensitive.
The benefits of automating cash application
What Can the automated Cash Application Process Do for You? Why is this important to run a business more effectively?
Efficiency and time saving: Companies with an automated solution to their AR processing are 46% more likely to enjoy automatic reconciliation between cash in and invoices due. This increases efficiency because accountants can spend less time manually comparing transfers and payments with accounts receivable records.
You can then use the time saved to direct your claims team to other areas of profitability. You save money by paying them for less time or by drawing their attention to more pressing financial matters.
Your fundraising cycle will also be shortened, particularly the time between receiving funds and posting transactions. It can provide real-time data to business owners.
Better customer service: Teams with automated money application processes provide their customers with more accurate information, and invoices are 46% more likely to be accurate and complete.
Automation reduces errors when entering and implementing payments. In addition, customers have fewer administrative documents because there is no need for a transfer form to send payments.
Scalability with business growth: Better customer service starts with the ability to quickly and easily acquire new customers. Invoice creation and payment collection then takes less time.
As you can see, automating the cash application process aims to be more efficient in other areas of your business. Your company could spend more time developing its customer base and providing accurate information to shareholders and owners.
Software for cash application automation
- Flexi Software
- Cforia Software Inc
Cash Application Software modules
- Bank Statement Automation.
- Lockbox Automation.
- Customer Remittances.
- Direct Debits Automation.
- Factoring Automation.
- Draft Automation and Management.
- OCR Lockbox.
- Deductions Software.
Obtaining timely and accurate money orders keeps your account up and running, speeds up collection and allows for withdrawals – saving your business money. Cash Application Services returns money to your company and streamlines the time-consuming and complicated tasks associated with your claim. Don’t fall behind. Automated Cash applications are here to help.