Why Cash Application Can Feel Like a Full-Time Job

If yours is like most companies, you’ve got at least one staffer managing cash application of payments. And if your cash application relies on manual processes, it can feel like a full-time job.

A recent National Association of Credit Management (NACM) poll finds 55% of companies dedicate one or two team members in accounts receivable (AR) to handle cash application. Matching payments that come in to current invoices can be tedious and time-consuming when done manually.

But there are at least two benefits to doing cash postings manually for AR team members:

• a better understanding of a customer’s payment habits based on cash postings, and
• the ability to provide more “one-on-one” customer service. For example, responding to a customer’s request to adjust a payment due date or schedule based on past months’ payment history.

Automated Cash Application: You Won’t Go Back

Tracking cash flow and keeping records up to date is critical for any company, no matter its size or industry. Cash application is the indispensable step in the process. So it’s no wonder that nearly every AR or credit & collections manager would prefer to run systems that are mostly or fully automated.

Implementing automation on the AR side — or optimally, both AR and payables — is never as easy as the software vendors say it will be. Working with your banks, software, IT department and customers (some of whom may balk at automating payments) can take weeks to months to accomplish.

Whether your goal is to fully automate, using an AI solution to get there, or to just upgrade some areas, always keep the three best practices for cash application in mind:

• always follow the company credit policy
• use internal resources to their utmost, and
• communicate regularly to customers.

(Adapted from the NACM podcast Extra Credit episode “Manual vs automated cash application: Are you maximizing your strategy?”)