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Thinking digital transformation? Automate your cash application process

Anitha Bhat Serrala Cash App Product Marketing

Anitha Bhat

15-03-2023 5mins read

Can automated cash application process support the overall corporate digital transformation agenda?  

The world has evolved to the global era of digitization as a result of the paradigm shift in technological advancements. Technology now plays an integral role in our daily lives - from mobile phones to automating routine tasks to data analysis for extracting insights - Innovative technologies are driving change in every industry today. Digital transformation is a result of these innovative technologies. 

Let’s break it down. What is digital transformation in finance? In finance, digital transformation refers to reshaping existing systems by utilizing technologies, to make them more efficient and resilient. Digital transformation has been on the finance leaders’ agendas for a while now and as the economy sours, finance leaders continue the mission toward autonomous finance in 2023 and beyond. Digital transformation remains the top priority for CFOs even as their mandates are expanding, and the pressure to play offense during difficult scenarios is mounting. To make the finance function faster and leaner, finance leaders must invest in AI, ML and other digital projects, that would help tackle the various competing financial priorities, profits, improve operating costs, make sound investment decisions, to name a few.

As we speak, the finance industry is constantly faced by new challenges and opportunities due to various factors coming together, including:  

  • the ever-increasing volume of data and how to process and analyze it 

  • the transition from legacy systems to modern platforms such as SAP S/4HANA.  

  • the transformation of finance processes with the help of technologies like AI and ML. These technologies are no longer restricted to future projects, as they are major components of present-day or imminent ventures 

  • the changing nature of work, roles, and responsibilities due to remote and hybrid working, which has made automation and digital infrastructure essential for almost everyone in finance 

These challenges multiply with Accounts Receivables, as the process involves highly manual and error-prone processes, such as cash application. Automating your cash application process can be a big stride towards achieving the current financial goals, namely, profits, operational efficiency and business growth. An automated cash application process means that invoices are matched to payments faster, making your processes efficient and giving you visibility on one of the key financial KPIs – Working Capital. Knowing in real time, the status of the working capital can lead to faster collections, more business from your customers and hence higher profits. This can also lead to better cash management and sound investments for growth.  

There are many factors like integrations and risk that come into play when choosing automation tools. It is also imperative to know how the automated process contributes to the overall transformation agenda. To help you navigate the current financial challenges and attain excellence in your digital transformation, this blog, presents key points on automated cash application process and how it contributes the overall company’s success and aid in controlling risk, facilitating sustainable growth, and enhancing working capital.

Does automated cash application process lead to more operational efficiency?  

Yes! Automating the cash application process can significantly enhance efficiency in Accounts Receivable (AR) processes, and finance and accounting overall. This is because the cash application process is largely repetitive, and rule based. With smart technologies, bank statements, remittance advices, lockbox, and settlement files can be processed automatically, thus eliminating unallocated cash, avoiding delays, and updating customer accounts promptly.  

As a result, automated cash application process can also increase visibility across the entire AR cycle. De-centralized and fragmented processes become a thing of the past, allowing AR teams to monitor critical KPIs in real time and enabling finance leaders and their teams to make data-driven, fast decisions to unlock hidden growth and profit opportunities

What is the impact of automated cash application process on the organization's working capital? 

An automated cash application process can have a significant impact on an organization's working capital. On average, about one-third of working capital is tied up in accounts receivable. By automating AR processes, namely cash application, companies can leverage internal funding sources, access hidden cash, and improve working capital. 

Efficient cash application is critical in reducing DSO, freeing up cash, and accessing funds as soon as possible. By ensuring customer payments are matched to open posts right away, businesses can speed up their cash application and reduce time spent on unrightful cash collection. This can be achieved through an automated and high-speed customer payment capture and matching machine that combines human-defined rules with intelligent automation. 

This approach can result in a highly automated cash application process that reaches matching rates of nearly 100%, providing real-time AR information to increase forecasting accuracy and cash visibility. The combination of automation and intelligent rules ensures that the process is fast, accurate, and efficient. In summary, by implementing an automated cash application process, companies can improve their cash flow, reduce DSO, and increase their working capital, which all combined have a positive impact on the company’s growth and profitability.  

How can automated cash application process further support corporate growth?  

An automated cash application process can provide unique business growth opportunities by enabling AR teams to access reliable data more quickly. With real-time payment-to-invoice matching, classification, extraction, posting, and exception handling, businesses can gain a clear understanding of their cash flow and working capital which is key to improve sales and enable growth. 

Having this clear line of sight into working capital enables better day-to-day planning and helps with making key investment and business decisions that can drive growth. By automated cash application process, businesses can ensure that they know how much and where they can access their cash instantly, which is crucial for seizing opportunities for improved profitability and making informed strategic decisions. 

What is the impact of automated cash application process on my current systems? 

Migrating to SAP S/4HANA is a digital transformation project that many finance departments are currently facing. While finance professionals may want to maintain their existing processes, they also want to ensure that these processes are geared towards the future. Fortunately, best-in-class solutions that are SAP-certified and SAP-embedded can migrate with organizations without any issues. This approach allows businesses to build on their established AR solutions and processes without having to start from scratch and create additional work for IT and procurement teams. 

When evaluating new approaches in AR, whether it involves migrating to S/4HANA, moving to the cloud, or implementing new technologies like AI and ML, it is essential to carefully assess which previous investments to keep and develop and which ones need improvement. Digital transformation should always prioritize core processes to ensure that businesses are prepared for the future. 

Thinking about digital transformation? Start with automating your cash application process 

In today's digital age, as finance leaders look to transform their business processes to improve efficiency and reduce costs, one area where automation can significantly impact efficiency is the cash application process. Traditionally, cash application has been a manual process that involves significant human intervention. This process can be time-consuming, error-prone, and often leads to delays in the financial closing process. However, with advances in technology, cash application processes can now be automated, allowing companies to streamline their financial processes and focus on strategic initiatives. 

Deloitte’s 2021 Digital Transformation Executive Survey highlights that digitally mature companies are more resilient and better equipped to manage rapid change and disruption. Businesses that have made previous investments in intelligent technology and forward-thinking business process design have been able to demonstrate greater adaptability and resilience, particularly during challenging economic times. Healthy cash flow is a bloodline for every organization and the cash application process is currently one of the most manual-intensive and error-prone processes in finance, which makes it imperative for organizations to prepare for the digital future by investing in cutting-edge technology to gain the highest possible rate of automated cash application process. 

In conclusion, automated cash application can support the overall corporate digital transformation agenda by streamlining the financial processes, improving efficiency, and enhancing the customer experience. Companies that integrate automated cash application into their digital transformation agenda can achieve significant benefits, including cost savings, improved accuracy, better decision-making, and enhanced customer relationships. With the continued advancements in technology, automated cash application is becoming more accessible to companies of all sizes, making it a valuable tool for companies looking to transform their business processes. 

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