In the cash allocation process, there are a number of key areas where timing is everything in ensuring an optimal process. Conducting activities in the wrong sequence or in a lethargic fashion can have severely negative connotations for internal and external stakeholders alike, as well as the organisation itself.

We’ll come to the fish/wine comparison, but it’s initially worth thinking about some of the key issues in a manual cash allocation process and how these can be addressed with process automation:

Customer Perception

Debt-chasing is a delicate task at the best of times. Conducted correctly this ensures that a customer is rightly paying for goods or services that have been contractually agreed to or delivered.

However, getting this wrong and chasing customers for non-existent debt, can, as a minimum, be irritating for customers. Where payment has already been received, but has not yet been allocated, or worse still misallocated, it can lead to incorrect chasing for payment from customers who are actually up-to-date, or worse still, the wrong customer.

Using an intelligent process automation platform will allow data to be automatically read from bank statements/portals, remittances and invoice data sources. By bringing this data together and with the use of machine learning algorithms, the matching and allocation process can be conducted at speed and with high degrees of accuracy. This ensures that the debt chasing team in accounts receivable departments is always working with the latest data, and are effectively deployed on accounts that require active encouragement to make payments.

Employee Engagement

The timing issue, centred around having up-to-date allocation information, will also affect internal teams. Working with obsolete data and chasing irate customers, who have already settled invoices, is a thankless task and can have significant negative impact on team morale and engagement.

Expectations from employees, on the systems and data they work with, is at an all time high. People are used to the high-performance ecommerce platforms that they utilise in their personal lives, and this experience is expected in their working environments. Being asked to perform tasks in a manual fashion or on antiquated systems is high likely to frustrate accounts receivables teams.

Often, these teams will have seen significant technical investment on digital transformation programmes across other parts of the organisation. A feeling of exclusion will only heighten if the work they are being asked to perform is based on systems and data outputs that haven’t seen that equivalent level of improvement funding. Not only is their time being poorly utilised, which will affect productivity in itself, but if employee engagement is low, this exasperation with internal systems and processes will only further have a negative impact on productivity.

An automated cash allocation process can help to ensure that teams always have access to the right information at the right time which leads to a better experience for teams and ultimately to other stakeholders they engage with and the organisation as a whole.

A study by Gallup, showed that ‘Engaged employees make it a point to show up to work and do more work — highly engaged business units realize a 41% reduction in absenteeism and a 17% increase in productivity.’

Inflated DSO Positions

With global DSO (Days Sales Outstanding) trending around 64% (Source: Euler Hermes), having a strategic focus on controlling DSO positions can bring significant benefits to an organisation. This may involve having programmes that focus on ensuring customer credit and risk is better assessed, that contracts and payment terms are better defined or improving the cash allocation process.

The latter is arguably one of the simpler to address and more enduring in terms of effectiveness. It is something that can be addressed with technology and solely

within the accounts receivable area not relying on other business areas like sales, legal, risk departments etc.

An automated cash allocation process will not only reduce the time taken for matching of data, but also help to improve accuracy and surface inaccuracies in internal data or customer payments, ultimately helping to significantly reduce DSO and suspense balances. Read about the experience of a Finance Director using technology to eliminate suspense balances here.

Cashflow

Understanding the current cashflow position is key to having a grip on an organisation’s accounts. Where the cash allocation process is slow or inaccurate this can lead to decisions on budgeting and forecasting being made on incorrect financial positions. This may ultimately affect the determination of future funding needs. Either arranging too little in terms of credit lines and potentially incurring risk, or arranging too much credit and facing increased costs.

Poor cashflow management will also affect how an organisation may view future spending and investments. If there is low confidence about the cashflow forecast, it is likely to impinge on potentially beneficial project spending, resulting in delays or projects never happening.

Automating the cash allocation process can help to ensure that the business has an accurate cashflow position and assist with future forecasting which ensures that informed decisions can be made with confidence on accurate data.

What has this all got to do with Fish and Wine?

The origin of this analogy is attributed to Gregg Thaler who was writing about CRM data. “Contact data ages like fish not wine…it gets worse as it gets older, not better.”

The analogy extends into the processes associated with the finance world as well. Having complete and accurate information is tantamount to ensuring that internal stakeholders are serviced by up-to-date systems and data, customers are accurately targeted for debt-chasing and the organisation has a firm grip on DSO as well as confidence in it’s cashflow position.

How to Ensure your Cash Allocation Data is more ‘Pinot Noir’ than ‘Mackerel’?

• Process Visibility

Gain visibility of what is happening in processes is key to ensuring the organisation has appropriate control of who did what, and when.

• Process Insight

Visibility surfaces up opportunities for Insight. Being able to clearly see what has happened previously, helps to make informed decisions on dealing with exceptions, identifying bottlenecks and enabling opportunities for process improvement.

• Process Automation

Automate manual and repetitive tasks associated with extracting and matching data required for the allocation process. Identify exception data and ensure it can be addressed promptly and accurately.

• Integrated Automation Platform

Linking process visibility, insight and automation elements is critical to ensuring data is surfaced up in a timely manner. Integration enables provision of tangible metrics for informed decision making and iterative process improvement. It will ensure internal users remain engaged, external stakeholders are contacted proactively and the organisation has control of key financial metrics.

Discover more about how to move your Cash Allocation process to a better ‘Plaice’

About Telic Digital

Telic Digital deliver fully integrated intelligent process automation platforms that address multiple business process requirements. We work with internal teams to assess processes, define requirements, and use our experience to ensure that solutions deliver measurable outcomes.

To understand how we can help your organisation please leave your details here and one of our experts will make contact.