Opening blog..

Cash Application and its automation


Eric Cantona

Sep 29, 2023 •
3 mins read
Cash Application and its automation


In this new world of ‘data is the new oil’, ‘generative AI capabilities’, ‘increasing automation of many manual tasks using robotics’ and so on, it’s clearly very important to move away from transactional tasks and take on more strategic decision-making roles. In this article, we dive into understanding the role of technology in managing manual and tedious tasks during the order-to-cash application process.

Cash Application is the process of matching incoming payments against respective open invoice(s) to close them in the ERP Systems (Enterprise Resource Planning). A faster and efficient process helps in optimizing working capital, improving accounts receivable reporting, improving customer satisfaction, implementing instant receipting, helping businesses with an effective credit policy among many other value additions. This process is especially important for businesses e.g., FMCG, logistics, online marketplaces, FINTECHs - that majorly require cash payments terms with little or no credit terms, have a large volume of transactions and a large volume of small invoice values.

Cash application process for an accountant

i. Receiving Payments: The company receives payments in all payment type modes e.g., Mobile money, bank transfers, cards, etc.

ii. Matching Payments: The received payments need to be matched with the corresponding invoices or customer accounts. This involves comparing payment information (like invoice number, customer name, payment amount) with the company's records to ensure accuracy.

iii. Reconciliation: The payments are reconciled with the outstanding invoices. Any discrepancies or mismatches are identified and investigated.

iv. Posting to Accounts: Once the payments are accurately matched and reconciled, they are posted to the appropriate customer accounts in the company's accounting or enterprise resource planning (ERP) system.

v. Updating Records: The company's financial records, including accounts receivable, are updated to reflect the applied payments. This helps maintain accurate and up-to-date financial information.

vi. Reporting: Regular reporting on cash application activities can provide insights into the company's cash flow, outstanding receivables, and payment trends. This information is valuable for financial planning and decision-making.

vii. Exception Handling: In some cases, payments might not match invoices perfectly due to errors, discounts, or other reasons. Handling these exceptions involves additional steps, such as communication with customers to resolve discrepancies.

Now picture recycling the above process over and over for multiple payments modes, multiple customers, multiple products (SKUs), multiple branches/countries, etc.? You can already tell that manual processing is not the best bet to provide an acceptable answer.

Other complex process challenges include;

i. Single payment received covering multiple invoices.

ii. Lack of integration mechanisms between bank APIs, mobile money APIs and ERPs like SAP ECC, QBO, etc.

iii. Inadequate cashflow forecasting positions.

How does Churpy help to improve order-to-cash automated application?

A faster cash application process includes payments and remittances aggregation, invoice matching and cash posting to ERP. This is made possible through 3 key things Churpy has done to date;

i. Connect to multiple data sources like banks, mobile money – to extract financial data

ii. Connect to multiple ERPs – to extract invoice data and write back reconciled entries

iii. Build a stand-alone rule engine that allows for comparing different data points

iv. Automated reporting on receivable positions, cash/treasury positions and KPI metrics.

Benefits of Cash Application

1. Apply cash faster and accurately for the ultimate customer experience.

2. Improved accountant and CFO productivity, allowing focus on growth and strategy.

3. Manage losses that could occur due to fraudulent payment messages, collusion and/or errors of omission.

4. Reduce day sales outstanding (DSO) ratio, allowing for better cashflow planning and improved credit policies.

Book a demo with us and let us achieve the benefits of cash application through our ERP and Reconciliation products.