Fintech Insights

Increase Sales with Automated Cash Application

October 27, 2017

Customer relationships are paramount in today’s ever-changing environment. The ease with which customers can locate and switch suppliers, even for strategic direct materials, is driving a cultural change within all parts of an organization. Gone are the days where it was just the sales team that managed the relationship; now support teams, such as credit and collections , also have an impact on the continued success of the relationship.

The conundrum for companies is how to ensure a great customer experience without increasing costs. Specifically, in the Cash Application arena, how does a company create a positive experience? And, how does that translate into increased sales?

Let’s explore the touch points Cash Application has with customers. There is the obvious, receiving payments and receiving remittance information. Additionally, Cash Application calls or emails customers for clarification on short payments or disputed items. Generally, they request additional information to help them document and establish a dispute for someone else to resolve. Missing remittance information as well as dealing with duplicate payments will warrant a call. Issuing refunds or following up on expired tax exemption certificates are also touch points with customers. Over the life of a relationship, it could be argued that your Cash Application team has more contact with customers than your sales teams.

Having a preponderance of payments arriving daily seems like a good problem for a company to have. However, in a recent FIS market study, one third of companies experience less than a 50 percent automatic hit rate for applying cash. This “good” problem quickly turns into a hindrance for future sales, and worse yet, becomes a detractor from the customer relationship you’re trying to build. Without introducing an automated solution, companies face one of two possibilities – increased costs to handle the volume or risk losing customers.

Late posting of payments means more invoices are open, reducing the available credit line established for a customer. When this customer attempts to order another shipment, they may be told the order cannot be placed until they pay for some of their invoices, even though the payment has already been received and just not applied. In today’s world, it may only take one occurrence of this situation to lose that customer forever.

By introducing an automated Cash Application solution, corporations increase the number of payments they can process each day. Tools that leverage Optical Character Recognition (OCR) increase the automatic allocation hit rate even further. The FIS market study found that the use of specialist technology for applying cash shows a correlation with increased straight-through hit rates. 17 percent of the companies surveyed were achieving 91 percent or higher hit rates. At a minimum, there is a competitive imperative for companies in all industries to allocate cash as quickly as possible. By doing so, companies can build a more accurate view of credit risk, reduce the amount of working capital “cushion”, and free up credit limits to improve customer relationships and help drive sales.