5 actionable ways to modernize cash application operations

New technology is only as effective as the speed with which it can be implemented. Both businesses and the financial institutions that support them need to invest time and energy into solutions that automate existing processes and can do so with minimal disruption to cash application operations. In a Deluxe Exchange breakout session led by Rick Scholz, director of Advisory Services, receivables industry experts outlined the actionable steps for automating treasury operations. 

1. Understand industry trends and your pain points

Scholz started the conversation by level-setting some existing industry data from Barlow Research Associates and Datos Insights, highlighting the discrepancies between the incoming payment types that banks and enterprise businesses want and the actual payment types that are received. For instance, businesses prefer incoming ACH payments, while paper checks remain the most common payment type received. Understanding current industry trends is important for your bank and business in order to optimize your cash application process. 

Crystal Stephens, vice president of product management overseeing Comerica Bank’s receivables products, called out several pain points the bank has heard from clients looking to automate their cash application processes, including time-consuming manual posting, disruptive matching and costly errors.

Attendees in the breakout session reported that their most significant pain points were reassociation of payment and remittance details and misapplied payments. 

2. Evaluate and choose the right automation solution

In addition to the pain points, Scholz emphasized the importance of choosing an automation solution that offers flexible automation to help meet your customers wherever they are in the automation journey. Prioritize solutions that can integrate with your existing systems and offer a comprehensive view of all payment channels.

Paul Jarrett, a payment industry and receivables expert, discussed his experience with different metrics to assess automation success. “There are many different metrics you can use. I think receivables automation can help understand the turnover ratio and measure how effectively businesses can collect outstanding payments and convert those into applied payments,” said Jarrett. He explained that a lot of clients are seeking to obtain and use this technology to help understand their clients’ payment behaviors (who are slower to pay vs. those who pay on time) so they can tailor communications to those customers and make informed business decisions. 

3. Implement a phased automation approach

With resources and IT constraints putting pressure on AR teams, a phased approach to receivables automation can prove an easier route for banks and businesses looking to improve their cash app operations.

Stephens shared that implementation, on average, can take 3-6 months, depending on various factors, including customer readiness, technology resources, and the level of automation. Stephens describes the different levels her bank offers customers to meet their needs, e.g., starting with a lockbox solution and then moving into an integrated receivables solution.

4. Leverage AI and machine learning

AI and machine learning capabilities hold a significant role in upgrading cash application operations. Scholz outlined how AI provides the initial data based on what the software has been taught up front, while machine learning is how the software learns over time and detects patterns (including errors that before needed to be manually fixed that didn’t get posted automatically). “AI and machine learning allow the business to then leverage the mundane activities, reduce the errors, improve and simplify and accelerate the collection process to then allow those resources to be deployed for better activities,” added Jarrett. 

5. Train and support your team

By partnering with an automation solution provider, banks and businesses can help speed up their implementation without running into staff capacity or IT resource constraints. Stephens mentioned the benefits of having subject matter experts (SMEs) involved from the point of sale through the entire lifecycle of implementation.

Implementation is also not a one-time effort. Successful automation initiatives can truly thrive with continuous support from payment partners and internal buy-in from executives. Scholz advises banks and businesses to promote a culture of continuous improvement and work with their AR teams to see how receivables automation will change their day-to-day operations.

By automating the cash application process, treasury operations teams can significantly benefit both banks and businesses, including reduced manual effort, improved efficiency and accurate data and optimized cash flow. You can follow these steps to help successfully implement an automated cash application solution and help make better-informed business decisions with AR-driven insights.