Cash Application Automation: What Your Business Needs to Know
Reading time: 10 minutes

How the Digital World and Automation are Changing Cash Application
In recent years, the entire accounts receivable (AR) process is moving digital in countless organizations, with paper-based processes widely considered outdated and inefficient. Now with automation, from the time an invoice is sent electronically, accounting personnel can trace its progress, including receiving and applying payments to invoices based on the electronic remittance information provided by the customer, all without using a single sheet of paper.

One area that has seen dramatic improvement thanks to AR automation is cash application. The term “cash application” refers to the process of matching an incoming payment to the associated invoice or invoices that prompted it.

Prior to automation, accounting professionals were buried in paper and required to manually match payments and remittance information. This is a tedious, time-consuming process that is prone to errors. Even the smallest mistake can be devastating to a business, since a “paid in full” customer may continue to receive late notices, while another customer is marked as paid when no funds have been received from the customer.

When payment arrives, AR software instantly searches the system to match it to an invoice. This can be done by invoice number, customer number, customer name, or another field, depending on a business’s unique setup.

Automating this process means that businesses can reduce their AR staffing resources or shift existing employees to more value-added tasks that positively impact the organization’s bottom line. The result is that businesses are more efficient while also maintaining their customer service standards.

Cash Application Challenges

At one time, manual cash application was easier than it is today. Payments were almost 100 percent made by check, arriving by mail. The invoice(s) paid would be listed on the check stub (remittance). Teams could easily take a stack of checks, match them to the invoices, mark the accounts as paid, then deposit the checks into the bank because all of the necessary information was already together.

For larger businesses, this often meant a team of employees who worked in tandem to process and apply payments daily, with at least one person responsible for transporting the day’s checks to a local bank. Over time, companies outsourced the check processing to bank lockboxes. They would then receive an electronic file with images of the checks and remittance. They still had to manually view the checks, remittance, and match the payments to the invoices, but the necessary information was still together and made the process relatively easy.

But in a technology-driven era, incoming payments are much more complicated. Many customers prefer to pay electronically, either by drafting from a company account using ACH or a credit card. Other customers prefer paying by wire or e-check.

Although electronic payments simplified the payment process for customers, the digital cash application processes for vendors encountered new challenges. Incoming payments aren’t always straightforward, with customers choosing to pay multiple invoices with one electronic payment and others opting to make a partial payment Add to this the situation where payment information is coming from banks and remittance information is coming from customers or you are required to pull the remittance information from websites. The result is an environment that makes cash application difficult and time consuming. A system using Robotic Process Automation (RPA) can be set up to handle all of these instances gracefully. If you can’t handle such situations electronically, your team will be forced to compensate by resuming manual processes.

As you look at your own business’s processes, chances are you can identify incidents that are the exception to the rule. If you’re shifting to automation soon, make sure you include your AR team as you plan and develop the new system. The AR team should also be beta testers, since their feedback will be invaluable. Even if you already have an AR solution in place, it’s important to check in with your team to confirm the system handles everything they need it to do.

Improving Customer Service

With Centreviews, the process starts as soon as an invoice is issued, with our system tracking each invoice and payment along the way. You’ll have transparency into whether invoices have been opened, providing valuable insight for those items that have not yet been paid. By pulling information like bills of lading and proof of delivery, your team will always have the supporting documents necessary to trace and resolve problems.

Cash application processes are also automated through Centreviews, solving many of the challenges commonly found with electronic payments. Centreviews Robotic Process Automation (RPA) accesses customer websites or captures customer remittance information to be used for matching invoices with payments. By using the remittance information to find a match, incoming payments are automatically matched to the invoice. This allows Centreviews to match multiple invoices with one payment.

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Centreviews also incorporates RPA. This type of technology is used to automatically process repetitive processes. In this example, the RPA mines the websites, captures the emails, and extracts the information from the remittance to complete the matching of the invoices with the payment to complete the cash application. In coming years, experts predict software built on this technology will be able to handle more complex tasks, bringing the benefits of human logic and reasoning to the precision of a software platform.

The Centreviews RPA technology will speed up your cash application processes, ensuring payments are applied as soon as they come in. Your team will benefit from having updated information on how much revenue you have, which will improve cash flow while giving you on-the-spot reporting. It will eliminate late notices to customers that have already paid or not matched properly.

Hear it from our customers!

Our own customers can attest to the value of Centreviews.
Here are just a few things our valued customers are saying.

“As an everyday user of Centreviews Receivables, I can say that processing deductions and credit memos is much easier than our previous manual processes. They provide fantastic support. Using Centreviews has allowed me to focus more time on the core aspects of my job.”
— Tom Carroll, Florida State Manager Foley Family Wines
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“For the payers who either emailed the payment information or provided it in other unreadable format such as from web sites, Centreviews’ RMS automated the process to capture this information and is now able to match the funds on the wire report to the remittance information provided in email and from web sites to provide images of both…”
— Rosenthal & Rosenthal
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“Centreviews Receivables Solution gives our staff the tool they need to cost-effectively research and manage chargebacks. Using Centreviews Receivables Solution has resulted in lower dilution, increased recoveries, and improved cash flow and profitability. Our management and lender are both pleased with the results. Thank you API and PSGI!”
— Alan Mandell, ULC’s Vice President and Group Financial Controller
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