Automating the cash application function can have a huge impact on the collection and deduction management process.
Auto cash software greatly speeds the process by properly identifying short-pays, deductions and disputes and can feed that data into a management system.
The most immediate benefit is the one-two punch of time saved and accuracy gained by no longer having to rely on data entry staff to key in each cash application. Where credit departments of the past were accustomed to a few days' time-lag between payment receipt and cash application, auto cash software can substantially reduce that window.
Staff that used to be burdened with significant data entry website chores can be redeployed to tackle more strategic tasks, such as deduction processing and reducing days sales outstanding (DSO).
An integrated collection and deduction management system provides seamless visibility during the collection process. If a customer claims to have paid an invoice with a certain check number, it can easily be looked up to see if the manual cash application was in error and take steps to correct the error.
Shortpays in the case of invalid cash discounts, for example, can be consolidated for Later collection. Freight and ad allowances can be established for customers, and an auto solution can automatically clear these allowances as they come in on the remittance.
Deductions can be automatically coded and even cleared before creating and leaving them open on the A/R, thus cutting down the number of open transactions and keeping the A/R as clean as possible.
Burnett, J. (2005). The Need for Autocash In The Collection And Deduction Process. Business Credit, 107(8), 12.