Is your business considering an automated cash allocation solution?

Before selecting the right vendor for your preferences, there is much to consider as to why your company needs automated cash allocation tools.

Are you looking to reduce manual activities and operating costs and speed up cash flow and forecasting? Do you need a more intelligent analysis and reporting tool to deliver straight-through processing?

Cash allocation (or cash application as often known) teams can often focus on high volumes or low-value manual processes. This may involve sorting through emails for remittance advice, manually entering data from remittances, collecting data from bank statements, portals, and other sources, and matching data to sales invoices. This can make the cash allocation process both costly and prone to error.

An automated cash allocation process helps organisations contain operational costs, gain visibility of the process, and use advanced recognition and process automation technologies to move towards straight-through processing.

What is an Automated Cash Allocation Process?

In simple terms, the cash allocation process allows incoming payments (BACS, Cheque or card payments) to be matched against open invoices that require payment. Once matched, invoices can be marked as paid and removed from outstanding amounts.

There are many steps for cash allocations – which we explore here.

1. Make Cash Allocation Work for Employees

The workings of any new tool begin with the employees who will have to work with it!

Being faced with new interfaces and operating systems will always bring some challenges, but the aim of any new system should be to enhance the ability of employees to perform tasks with ease and more efficiently conduct process steps. Not only should it be a quicker task, but also easy for staff to adapt to use and then pass on to the customer.

For the most efficient outcome, it is essential to work with operational teams to ensure alignment on terminology and logical nature to screen and field layout.

For example, these may be customised to mirror or copy existing systems or applications already used to work within.

2. Consider Your Customers

Of course, for companies, the focus of any automation project is to streamline processes and reduce operational costs.

But while this is the desired outcome, sufficient attention should be applied to ensuring the customer experience is maintained and improved. You don’t want to invest in a new cash allocation process only to find you have dissatisfied customers do you?

One of the biggest failings of a poorly designed cash allocation process is the failure to update accounts receivable teams with up-to-date information for chasing debt. This results in a poor customer experience when chaser communications to customers occur for non-existent debt.

3. Speed of Change

Often when considering automating a process there can be a tendency to want to address everything from the start, and go from zero to 100 without stopping.

However, it is often more beneficial to take iterative steps, where process steps can be fully understood, automated, and benchmarked to ensure the expected gains are material.  Not only can organisations can reap the rewards, but also learn if there are any errors in processing and rectify it swiftly before moving onto the next.

4. Evolution not Revolution

With so much talk about digital transformation, organisations often feel that in order to make changes, existing systems and processes have to be torn down for change to be effective. However, implementing automation into the cash allocation process does not mean that the foundations of existing ways of working need to be pulled down and re-built from scratch.

Terms like Artificial Intelligence and Machine Learning can be daunting, but the reality is that many of these technologies have been baked into automation solutions for many years and their use can be gradually increased over a period of time for maximum effectiveness.

5. Benchmark Automated Document Recognition

If the cash allocation process requires automated recognition of remittance documents from scanned images, email attachments or documents ingested from portals, it is good practice to measure automated extraction rates.

Cognitive capture technologies are often delivered with an ‘out-of-the-box’ level of recognition. This is based on embedded design time machine learning which comes from previous experience of processing remittance documents. There will however be nuances to the information being collected and this where iterative machine learning can be applied. This ensures that the system effectively achieves higher levels of recognition over time.

6. Multiple Sources, Multiple Formats

When choosing a cash allocation too you need to be confident it to be able to handle multiple sources and channels.

The fact is that in any business, remittance advice can often be received across multiple channels. Often, accounts receivables teams will be working with emailed attachments and portals which need to be monitored for the cash allocation process to proceed. As well as multiple channels, different formats can be received such as PDF, Excel and HTML to name a few. There so many types of data to work with – and if the tool can handle a variety of sources it will take away the need for manual intervention.

7. Choose the Right Technology

Organisations are constantly adding to the number of applications and technologies that they utilise. A  This creates an overhead in terms of application management for things like support, maintenance and integration. Therefore, when considering automating the cash allocation process, it can be beneficial to consider a technology platform that can also solve other finance, and non-finance, processes.

Common capabilities in the cash allocation process like reading from documents, matching data sets, workflow and exception handling are common to other business processes such as Supplier Invoice Processing, Sales Order Processing and Customer Onboarding. By utilising a common technology stack to solve multiple problems, there are economies of scale for licencing as well as system maintenance.

8. Cost of Ownership

When considering the cost of ownership, it can be wise to think more broadly than just the cost of licencing or subscriptions. Overheads from hosting and maintenance relating to support, upgrades and integrations are all factors in the total cost of ownership. Utilising a platform that can cover multiple business processes, helps to reduce the respective overheads and ensure that applications don’t become part of the legacy application stack that receives little or no attention.

9. Exceptions to the Rule

There will be instances where transactions in the cash allocation process which can’t be resolved automatically. This should be expected and there should be built-in exception handling paths that allow the heuristic knowledge of accounts receivables teams to help resolve these.

From a process improvement perspective, exceptions are useful to help understand where a process could be adjusted to better handle exceptions moving forward. This relies on underlying process intelligence technologies which can identify where specific transactions have not been processed in accordance to the desired path. By being able to measure and analyse these, systems can be adjusted and ensure continuous improvement.

10. What Are Dark Processes?

Dark processes are the unofficial steps in the process that are undertaken in order to push transactions through. These are typically undocumented workarounds that users have introduced to accommodate things which the original process was not designed to handle or where users have identified an easier way of performing tasks.

Often, these are necessary interactions to allow transactions to get through. However, uncovering these can help organisations improve efficiency and ensure compliance with processes. Process intelligence technologies allow full tracking and tracing of what has happened in every process instance and provide the organisation with valuable insight, facilitating process remedial action.

To discover how your organisation could benefit from an automated cash allocation solution you contact us here and one of our experts will be in touch.