October 10, 2019
This dream seems out of reach to most businesses.
In fact, most businesses are not happy with their current electronic funds transfer processes – the way in which they allocate ACH transactions and wire transfer payments from other businesses to pay for purchases made on credit (such as 15-day or 30-day payment terms). The problem is especially big for suppliers that receive a single electronic payment for hundreds or thousands of open invoices.
One prominent medical device distributor relies completely on manual processes to allocate ACH transactions and wire transfer payments received from customers across the globe.
Sixty-one percent of accounts receivable professionals who participated in a recent webinar sponsored by Rimilia described themselves as being less than satisfied with their department’s current EFT processes. Worse, 10 percent of the participants on the webinar described themselves as being “extremely dissatisfied” with their accounts receivable department’s current EFT processes.
It is no surprise that 84 percent of businesses have a “high” or “moderate” level of interest in finding solutions to automate the accounts receivables process, per the Business Payments Coalition.
But accounts receivable departments must be careful in picking an automated solution.
What to look for in a cash allocation solution
Here are eight key considerations when evaluating automated cash allocation solutions:
- Accepts any payment type, from any channel: Analysts have predicted for years that most of the payments that businesses receive would arrive electronically and be posted straight-through without human operator intervention. Those predictions have not come to pass. Despite the major inroads that electronic payments have made in the United States over the past several years, paper checks remain the dominant payment method between businesses. Ninety-five percent of businesses still receive checks from their customers, per the Institute of Finance and Management (IOFM). Meantime, 91 percent of businesses receive ACH transactions, 80 percent of businesses receive wire transfers, and 48 percent of businesses receive card payments. With the end of paper checks nowhere in sight, businesses need cash allocation solutions that can handle any domestic or global payment, from any channel.
- Accepts all data (with or without remittance detail), from any channel: Advanced cash allocation solutions aggregate any remittance advices received at the bank lockbox, as well as decoupled ACH and wire transfer remittances transmitted via email in any format.
- Is ERP agnostic: Advanced cash allocation solutions integrate with any ERP to access the customer master data and open receivables information required for accurate matching.
- Has a high full payment no-touch rate: Most providers of cash allocation solutions like to tout their technology’s invoice line-item match rates. But matching 80 percent of invoice line items to open receivables does a business little good if it still manually handles half of its payments. A better gauge of a solution’s effectiveness is its full payment no-touch rates. Advanced solutions allocate a high percentage of customer payments straight-through, without human operator intervention, regardless of whether the biller even receives a remittance advice. These solutions use remittance advices as a last resort for matching payments.
- Assists with the resolution of exceptions: Advanced cash allocation solutions offer users suggestions for resolving exceptions. Driven by artificial intelligence, these “auto-finder” or “one-touch” capabilities significantly accelerate the exceptions resolution process.
- Provides a single receivables platform: Most providers of receivables solutions don’t offer a single platform for tasks such as cash allocation, deductions management, collections and analytics. An integrated accounts receivable platform delivers better results end-to-end. For instance, a promise-to-pay received by collections can greatly assist with cash allocation by automatically matching the payment when it arrives with the amount promised to collections.
- Co-exists with bank lockbox providers: Many businesses must maintain a bank lockbox because of the lines-of-credit or other financial services the business receives from their bank. But that doesn’t mean that a business must use all the services offered by its bank lockbox provider. Advanced cash allocation solutions eliminate the need to pay bank lockbox providers to key remittance data – typically the most expensive service offered by a bank lockbox. Look for a solution that offers the flexibility to operate independent of a bank lockbox provider (if you
- Supports global trade and commerce: Many businesses have financial shared services facilities across several continents. Global trade and commerce requires businesses to find a cash allocation solution that can manage numerous banks and currencies, multiple ERP allocations and divisions (with potentially complex parent/child relationships), and various file formats and payment methods (including EDI 820, MT 940 and MT 942, BACS, RIBA and SEPA). Since European businesses typically don’t send remittance advices, it’s also important that the solution not be reliant on remittance advices for automatic matching.
Ready to automate your cash allocation process? Click here to listen to our recent webinar, “Conquering the Chaos of Applying Electronic Payments through Artificial Intelligence.”