3 keys to best-in-class cash application automation

Enterprise businesses need high visibility into cash flow and capital, and they can’t afford errors and delays in the cash application process. Even so, only 19% of large companies have highly automated accounts receivables (AR) groups, leaving a large majority of them completing cash application at least partly through manual processes.

“Historically, you have giant teams conducting cash application processes,” says Nathan Dixon, Senior Product Manager of Integrated Receivables at Deluxe. “Some of the exceptions that have to be matched can be quite complex. Teams could be dealing with a wholesale invoice with 100 different line items on it, matching it to various payment files. It can be very difficult to do manually.”

Lessening manual processes in cash application is essential to getting cash into the business quickly and efficiently. It also helps drive up the accuracy of forecasts.

“If you have problems in your cash application and you're not seeing a healthy stream of funds, it's hard to gauge how much money you're expecting from, say, a new product launch or a new service you've put into the market,” says Dixon. “If you're not able to benchmark that in any standardized way, it becomes difficult to forecast anything out in the future.”

Automating cash applications can increase speed and efficiency to inform smarter, more accurate forecasts for enterprise businesses. Several key components of a receivables solution make that possible.

1. Data normalization

A modern receivables solution should be payment source agnostic. Since a single enterprise can easily have ten or more sources of payments — each sending those payments in different structures, with different data — its receivables solution should be capable of normalizing the data received from any payment source to a standard model.

“All invoices that have been sent out need to be matched to payments that have come in, and you have to be able to integrate each of them from various ERPS,” says Dixon. “You also have to take in each banking file from its respective financial institution, and as a result, normalize the data from each source into a singular data model so that the cash application [process] can run.”

2. Flexible architecture

All enterprises handle payments in a unique way, depending on their payment mix and unique business rules. And businesses should be able to set up their own rules for how automation handles the process.

Since every company needs vertical-specific information to complete the payment process, for example, a receivables solution should adapt to case-by-case requirements by accommodating companies with custom fields.

“Healthcare is a great example because you need to tie in insurance information and be HIPAA compliant — which involves a security compliance aspect, as well, as you’re protecting the end client’s data,” says Dixon. “Custom fields allow healthcare businesses to automate cash application for their specific vertical.”

3. Dashboards for forecasting and reporting

In addition to automated payment matching, a structure of normalized data and customized architecture will support accurate, efficient, and holistic reporting. A solution capable of payment processing and payment management delivers the most benefits in areas like reporting and forecasting because it can provide businesses with a complete picture of their receivables.

A modern receivables solution should extend on those benefits by equipping enterprises with simple-to-use data visualizations and other accessible reporting tools — available via dashboards — that drive up visibility into the overall health of the business.

“A lot of Deluxe’s cash application competitors are just an interface [and] don't do end-to-end payment processing,” says Dixon. “Deluxe has direct relationships with banks and their clients. We process the payments and we're the application for managing those payments. It’s great for our clients because we have raw forms of the data, and we can give them enhanced visibility and tools to act on that data.”

Conclusion

Clear visibility into payments and cash flow helps enterprises identify issues, make more informed decisions, and ultimately grow their businesses. Automating cash application, in particular, can help enterprises get cash into the business faster by eliminating the AR bottlenecks that hold them back while saving them money.

“Automated cash application is highly influential for driving down operational expenses and making sure that payments are in the business’ accounts as fast as possible,” says Dixon.