What is Cash Application?
Arguably the most critical step in the AR process, cash application refers to the process in which an organization’s incoming commercial payments are matched with outstanding invoices to accurately credit and reconcile customer accounts. However, this process is traditionally far more seamless in theory than in practice. Remittance information, in its multitude of formats, rarely is a direct match for invoices and paid totals often differ from single invoice amounts, making cash application a tedious process for AR professionals.
As cash application remains largely a manual process across industries, dedicated cash application professionals are typically required to manage these tasks. What’s worse—by the time an employee matches payments to their respective invoices, posts invoices to their matching accounts via customer account numbers or names and finally updates the company’s cash management system with the reconciled invoices, valuable time is lost by the AR Department. Such time lost is not just a mere inconvenience—it has a serious negative impact on a company’s financial wellbeing; an inefficient cash application process stretches the invoice-to-cash cycle, negatively impacting a business’ DSO and working capital position.
Other financial detriments of manual cash application have been made apparent through the rising costs of overtime and employee turnover, as well as through implications of inaccurate or delayed payment matching. As a major portion of customer payments may be sent toward the end of the month for internal accounting purposes, the time-sensitive nature of cash application may require that employees work longer hours during these high-volume times, resulting in heightened labor costs and employees losing their hard-fought battles with burnout. Additionally, when payments are inefficiently or inaccurately matched, the cost implications of customer dissatisfaction should not be ignored—customers who experience inaccurate or delayed payment matching may become frustrated and opt to conduct their business elsewhere, eradicating your untimely processes, and your products, from their financial equation altogether.
Why Are Existing Solutions Failing?
Cash application automation systems do exist in today’s market; however, the available systems merely remedy the symptoms of inefficient cash application and ignore the deeply rooted systemic problems. For a solution to truly be useful, it must provide seamless integration of AR, Collections and Cash Application activities while requiring little to no manual intervention. Additionally, an impactful solution must be scalable yet highly customizable, allowing for the varying attributes of organizations across multiple industries to account for unique complexities—whether those businesses are SMEs or Fortune 500 companies. Nothing of this sort has existed, until now.
The Bectran Approach
The Bectran Cash Application System provides seamless end-to-end integration of all AR aspects, from Invoicing and Payments, to Tax Management, Disputes, Collections and Cash Application—all with pinpointed accuracy. This accurate and robust system achieves a perfect cash application experience that requires zero instances of manual intervention when implemented with available full automation capabilities. With the Bectran system, clients in any industry will regain control of their AR Departments, allowing businesses to have an accurate real-time view of their available working capital, cash assets, liquidity and overall financial health.
How the Bectran Cash Application System Works
Bectran intelligently automates the entire cash application process to attain utmost accuracy at digital speeds. To achieve this, the Bectran system first obtains and processes payment transactions using BAI, BAI2, OFX and other transaction data obtained from financial institutions. Next, Bectran’s customizable and robust matching algorithms accurately match payment transactions to customer invoices, accurately accounting for shortpays and overpays while reporting exceptions with recommendations for resolution. Then, the Bectran Cash Application System applies these customer payments to their matching invoices, simultaneously updating each customer’s invoice status. Finally, the Bectran system updates each customer’s AR position, allowing clients’ books to accurately reflect the real-time reception of customer payments while providing a full audit trail of the transactions processed.
Benefits of the Bectran Cash Application System
With the Bectran Cash Application System, businesses in any industry can maximize their cash flows and reduce time spent on cash application activities, allowing more time to be spent on strategic planning and execution of AR Department goals. Additionally, the Bectran Cash Application System accepts and transmits data from any form of payment and has an open API to financial institutions and financial service providers. With the usage of Bectran’s full automation capabilities, users of this innovative system can experience 100 percent cash application to open invoices. The fast and efficient set-up will allow any company to enjoy the benefits of the Bectran Cash Application System faster than ever thought possible.
Bectran is the industry leading B2B credit management SaaS platform that streamlines and automates the entire commercial credit process. From credit applications and customer onboarding, to Collections Management, Invoicing, Disputes Management and Cash Application, Fortune 100 companies and SMEs alike utilize Bectran as an integral solution to the problems associated with the traditional credit process. Through our array of innovative automated solutions, we help credit professionals focus more on strategic functions and less on tedious manual tasks, significantly lowering the risk of credit defaults and the cost of collections for our users.
About the Author
Hali Sawyer is the Marketing Specialist at Bectran, Inc. She is passionate about helping credit management and AR professionals achieve their highest potentials by discovering all that Bectran’s industry leading solutions have to offer.
Bectran is a registered trademark of Bectran, Inc.