Automated Cash Application: Top 10 Tips

In this post we examine some of the top tips for organisations considering an automated cash application solution. With many tools on the market, we examine some of the key capabilities to look out for and considerations for vendor selection.

Automated Cash Application Solutions allow organisations to:

  • Reduce manual activities and operating costs
  • Speed up cashflow and forecasting
  • Reduce the need for suspense accounts
  • Deliver on straight-through processing
  • Improve customer and employee relations

Cash application teams can often be focused on high volumes or low value manual processes. This may involve sorting through emails for remittances advices, manual data entry from remittances, collecting data from bank statements, portals and other sources, and ultimately matching data to sales invoices. This can make the cash application process both costly and prone to error.

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

What is an Automated Cash Application Process

Automated Cash Allocation Flow

In simple terms, the cash application 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.

Principal steps for cash application:

  1. Collecting remittance advices from various sources
  2. Accessing payments made into bank account(s)
  3. Matching payments and remittances
  4. Matching payments to open sales invoices
  5. Identifying exceptions
  6. Managing exceptions
  7. Posting to the ERP/ Finance system
  8. Analysis and reporting

However, there are many complexities and nuances in the process that can make this process difficult to manage. These are often magnified with a manual process.

Typical manual cash application issues:

  1. Payments with incorrect or missing reference details
  2. Single payments for multiple invoices
  3. Part payment of invoices
  4. ‘Alias’ companies – where the payment is from a different company than the one linked to the invoice transaction
  5. Incorrect or duplicate payments
  6. Currency fluctuations or other adjustments to costs
  7. Payments into multiple bank accounts

Top 10 Tips for Automated Cash Application

  1. Consider Customers

Often the focus for automation projects is singularly placed on the mandate to reduce operational costs. Whilst ultimately this is clearly the desired outcome, sufficient attention should be applied to ensuring the customer experience is maintained and ideally improved.

One of the biggest failings of a poorly designed cash application 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.

Automating the process and ensuring tight integration with ERP and other finance applications ensures systems and subsequent processes are informed with near real-time information

  1. Consider Employees

The aim of any new system should be to enhance the ability for employees to perform tasks and  more efficiently conduct process steps. In deploying new systems to aid with the cash application process, employees will be presented with new user interfaces and potentially different ways of operating.

It is essential to work with operational teams to ensure there is alignment on terminology and a logical nature to screen and fields layout. These may be customised to mirror or copy existing systems or applications that may already be used to working within.

  1. Benchmark Automated Document Recognition

If the cash application 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. In part, this is to ensure the anticipated savings from reduced manual data entry are being achieved, but also to ensure no degradation of the service over time.

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

Machine Learning recognition improvements


  1. Multiple Sources, Multiple Formats

Remittance advices 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 application process to proceed. As well as multiple channels, different formats can be received such as PDF, Excel, HTML etc.

For the automated cash application solution to be effective it needs to be able to handle these multiple sources and channels. In doing so, it removes the need for teams to manually monitor these channels and physically process documents.

  1. 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 application 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.

  1. Technology Suitable for Multiple Business Processes

Organisations are constantly adding to the number of applications and technologies that they utilise. A survey by Okta states an average of 88 apps per customer. This creates an overhead in terms of application management for things like support, maintenance and integration. Therefore, when considering automating the cash application 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 application 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.

  1. Speed of Change

Often when considering automating a process there can be a tendency to want to address everything from the start. 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. In this way organisations can reap the rewards much faster through a more rapid deployment.

  1. 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.

  1. Exception Handling

It is always likely there will be some transactions in the cash application 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.

  1. 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 to improve efficiency, as well as ensuring compliance with processes. Process intelligence technologies allow full tracking and tracing of what has happened in every process instance and provides the organisation with valuable insight which can then facilitate process remedial action.

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

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