The process of matching incoming payments to invoices is not to be underestimated in its complexity. Missing remittance details, information living in multiple portals and systems, researching exceptions, and managing multiple stakeholders with competing priorities is just the tip of the iceberg.
Can your team relate?
To overcome these challenges, your team may have developed unique ways to manage their workload. For example, they might have cheat sheets detailing your customers’ quirky payment habits. Additionally, your team might work overtime during the last week of the month, and even throw in a few weekends here and there. And if your company has been growing and adding new customers, your team probably had to keep growing just to keep up.
While your team might be doing its best with what they’re working with today, latent inefficiencies may be reverberating throughout the order-to-cash process.
Have you identified how manual and inefficient cash application processes may be affecting credit and collections teams, sales, financial reporting, or even your customers?
Below, we outline the risks of having an inefficient cash application process.
Collections Teams Try to Collect on the Wrong Invoices
Collections teams rely on data to determine their workday: who do they need to reach out to? How much do they owe? Which invoices are overdue?
But when cash isn’t applied accurately and on a regular basis, the collections management process will start to break down. Account statuses will quickly become outdated and disputes will go unresolved, leading to collectors trying to collect on invoices that may have already been paid. Obviously, this would not be a customer friendly experience, and your collections team will become frustrated after wasting their time and upsetting the customer.
Credit Lines Aren’t Opened
A poor cash application process becomes a barrier to sales. Business-to-business transactions are largely done on credit terms. Usually, each buyer is a assigned a credit limit by the supplier based on certain factors like credit-worthiness, risk, payment behavior, etc. If a buyer reaches their credit limit, they cannot make additional purchases until they replenish their credit by paying what they’ve already been invoiced.
Often, and frustratingly, a buyer will have submitted a payment, but that payment will take an extended time to be applied within the ERP. In the meantime, that customer’s account status hasn’t been updated and their credit line remains closed. At this point, not only is the customer frustrated, but the sales team has become frustrated as well.
Financial Reporting Comes to a Halt
We’re all familiar with the cliché “Cash is King,” especially in order-to-cash. Financial leaders are often focused on recognizing as much cash as possible before a new month starts so that they can report actual and forecasted revenue and open accounts receivable. If cash cannot be recognized, financial reporting is delayed or halted. Consequently, companies will struggle to report to government agencies, shareholders, and investors.
Customers Start Looking at Your Competitors
If you do not have a clean order-to-cash process, customers will start viewing you as difficult to do business with, especially if you’re in an extremely competitive market. For example, companies that sell commodities, as well as transportation, distribution and logistics companies are, unfortunately, easy to replace. These companies often differentiate themselves with their customer service experience, and order-to-cash is integral to that experience. After the sales team has done a ton of work to sell goods and services, and the customer has been onboarded and invoiced, the cash application and collections processes are the final touchpoint with the customer. Allow your teams to put their best foot forward, and round out the customer experience, with tools that eliminate posting errors, resolve exceptions quickly, and apply cash quickly and accurately.
How Sidetrade Can Help
Sidetrade Cash Application streamlines and accelerates revenue recognition by automatically matching complex, unstandardized payment information from multiple sources. This is especially important when unallocated cash is a business challenge, or if cash application managers and analysts are struggling with manual processes, accuracy, and reconciliation. To learn more about Sidetrade’s Cash Application solution, please contact us.