How to Maximise AR Efficiency with Cash Allocation Software

Companies looking to increase their accounting efficiency will almost invariably begin by analysing their accounts receivable process, specifically when it comes to cash allocation. Done manually, the cash allocation process can be a frustrating, time-consuming activity, requiring the focus of multiple staff who could be working on reducing DSOs or resolving deductions.

Instead, a team is spending entire days matching amounts received from various sources to open items on a sales ledger, often without the help of remittance slips. Once matched, it’s another process to update the customer account and another to update the company’s balance record.

Manual cash allocation has adverse effects

There are several undesirable consequences of manual cash allocation beyond wasted time. Delayed updates to customer accounts can result in your credit control team contacting a customer for a payment that has already been received. Additionally, customers could be using their banks’ Faster Payments Service (FPS) without result, while the cash may be in your account quickly, manual allocation won’t happen until the remittance note arrives days later.

Larger organisations may receive payments through multiple ERP systems and even manage payments to sub-companies or departments within the organisation, which could lead to total matching and resolution chaos with a manual system. All these effects combined with the wasted time and cost of manual cash allocation could inhibit company growth on an ongoing basis.

Using automated cash allocation software, however, can eliminate these unwanted effects and provide a range of other benefits. Accounts receivable automation software solutions like Cashbook integrate with ERP systems and banks to automatically read, match and record your open items against payments received, providing a more up-to-date picture of cash and accounts, and freeing up valuable time of staff.

Enjoy fewer unallocated payments and open items.

With automated cash allocation software, open items can be reconciled almost as soon as a payment reaches your bank. Following rules and conditions preset according to your organisation, the automation software matches payments to accounts in an instant, letting you credit payments and resolve accounts much faster.

Achieve greater accuracy and minimise rework.

Automating your cash allocation process eliminates the opportunity for human error and delivers a more complete, accurate cash record. By minimising errors, the system minimises the need and time required to redo the allocations.

Decrease days sales outstanding (DSO).

By correctly allocating cash faster, accounts receivable automation software can resolve open items sooner and thereby make the average collection period shorter. Generally, regarded as a measurement of how well an organisation’s AR processes are being managed, a shorter DSO can be an important metric of your accounting efficiency.

Receive payments from multiple sources with ease.

Advanced cash automation software like Cashbook integrates with most banks and seamlessly reads payments received via lockbox, cheque, wire transfer, BACS, credit and debit card and more. Payments are allocated according to your preset criteria, regardless of format.

Gain complete visibility with a full audit trail.

Cash allocation software provides a full record of all matches and transactions, offering you complete visibility into your organisation’s cash management. By analysing when and how payments are received, you’re able to better evaluate and improve the efficiency of your accounts receivables.

Save money on resources and bank fees.

By automating your organisation’s accounts receivables, cash allocation software minimises the time AR staff must spend manually matching payments, resolving accounts and updating records—which can be especially helpful during the busy end of the month. Additionally, automatic cash allocation eliminates the need for bank fees for data entry.

Improve customer service and satisfaction.

Maintaining the most up-to-date account information possible can significantly improve your customer experience. You won’t try to collect payments that have already been made, and when customers call for support or enquires, your representatives will have current information for them.

Cash allocation software can have a significant impact on the efficiency of your accounts receivable and on your organisation’s bottom line. By automatically matching payments and resolving accounts, cash automation systems deliver faster cash allocation, improved customer service, reduced processing costs and greater accuracy, all while freeing up valuable staff to focus on more challenging aspects of your organisation’s accounting.

For more information or to find out how cash allocation software and accounts receivable automation can benefit your organisation, contact the Cashbook team on +353 61 338 400 (Europe) or +1 818 292 9015 (US).