In times of uncertain economic conditions, optimized cash management could be key to business survival and success. AR teams in mid-sized businesses are bombarded with the rising volume of outstanding receivables under the umbrella of a short cash buffer for day-to-day operations. According to Pymnts, 56.2% of small and mid-sized businesses (SMBs) regularly experience cash shortfalls.
With multiple payments and remittance data formats, mid-sized businesses heavily rely on manual intervention to read, analyze, match, and reconcile the incoming payments.
At HighRadius, we guide our customers to seamlessly capture remittance data across check stubs, emails, and web portals. Learn how the RadiusOne Cash Reconciliation App can enable straight-through cash posting with automated invoice matching and short-payment identification.
Let’s drill down the challenges in remittance processing and learn the significance of building a robust remittance advice processing workflow for checks and digital payments.
Why is Remittance Aggregation So Complex?
Remittance aggregation and processing can be really tedious and time-consuming. But what makes it so complex? Well, the root cause of cash application-related bottlenecks is due to various unstructured remittance scenarios.
Due to the lack of standardization, remittance data comes from a variety of sources, in various formats and templates. AR analysts have to handle the resultant confusion in remittance scenario with a series of steps.
Let us look at how the various steps involved in the cash application process:
- Remittance fetching:
Many companies utilize bank lockboxes to receive check payments. The bank reads the incoming checks with data entry specialists or robots and digitizes the remittance data. Later, this data is forwarded to the company’s ERP. But most ERPs are not optimized to match payments meant for multiple invoices, payments sent without remittance, or short pays to open invoices. AR analysts need to manually aggregate remittance data from check stubs and process the payment.
Digital payments often do not have any remittance data. When remittances are sent separately, manual intervention is required to match the incoming payments to open invoices. Cash application analysts need to manually access and download remittance data from emails and web portals. This error-prone and time-consuming process can increase the overall time-to-cash.
- Interpretation of data:
Analysts need to manually pull details from backup documents, enter data into spreadsheets, and match it to payments. If we were to go over ‘A Day in the Life of an Analyst’, you are most likely to find them chasing transactions and spreadsheets.
The downstream consequences of this slow and error-prone cash application process are:
- High Processing Costs: For hyper-growth mid-market companies, the growing volume of receivables requires additional resources for cash posting.
- Inaccurate Cash Posting: With a process that is intensely manual, keying-in errors are a common occurrence. Furthermore, unresolved exceptions can occur due to a lack of or insufficient information.
- Lack of Visibility: Limited visibility into payment status can negatively impact collections follow-up and result in a longer time-to-cash. Manual deduction identification can further delay the dispute resolution process.
How Automation Helps in Intelligent Remittance Capture
In recent years, AR automation solutions have transformed the cash application process for better business implications. Let’s see how AI-led automation solutions such as RadiusOne AR can help you achieve 95% straight-through cash application with automated remittance aggregation.
- Email Remittance Capture: AR analysts can pull remittance details from emails and email attachments using AI-enabled technology to ensure accurate data capture across all remittance file formats and languages.
- Check Remittance Capture: Template-agnostic technology can help save your AR team’s time by auto-capturing remittance from check stubs. This will remove any dependency on bank lockbox services or in-house resources for key-in, reducing operational costs.
- Web Remittance Capture: The Cash Reconciliation App helps auto-capture remittance information from customer portals and popular accounts payable (AP) networks with the help of Robot Processing Automation.
What to Do Next?
With the increasing volume of payments, it’s crucial to ensure that your company credit is not tied up because the cash was not applied to the system. Automating the cash application process helps mid-sized firms accelerate cash flow while enabling optimized resource utilization. Take a few minutes to help us understand the problems you face with AR:
- What area of your accounts receivables do you think needs improvement?
- Does your finance staff spend a lot of time manually gathering remittance data from varied sources?
- How efficient is your cash application process?
Understand how a fully automated cash reconciliation ecosystem can improve your cash flow; check out this blog on “How Automating Cash Reconciliation Can Impact Your Bottom Line”