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The Elevation Blog

Seven Ways to Slay the Nightmare on Receivables Street and Rescue Cash Application

Authored by Robert Unger

Your sales are humming along, bills and invoices are being sent to customers and the payments are flowing back to your company, and there a lot of payments. 

Blog-Seven-Ways-to-Slay-the-Nightmare-onIn our research, large corporations ($500 million + annual revenue) receive an average of nearly 25,000 payments per month; midsize companies ($10-500 million) receive an average of more than 5,000 payments per month.  

That’s good news.  But, that’s also where the nightmare starts! 

In another survey of mega-corporations NACHA conducted in collaboration with the Credit Research Foundation (Click HERE for details), more than half of the respondents reported that a paltry 0-20% of payments were processed automatically, where invoices closed automatically, without manual intervention. 

That’s a shockingly dismal rate for the 21st century, and means that a lot of credit, receivable and related financial professionals spend too much time manually matching payments to invoices.  The burdensome labor adds costs to payment acceptance, slows cash flow, and can damage customer relations (“Why don’t you have a record of my payment?”). 

Now, it’s easy enough to blame “bad” customers for creating the nightmare.  Afterall, it’s the customers that send partial payments, provide incomplete remittance advice in formats that are difficult to automate, take deductions that may not be warranted, and otherwise complicate receivables operations. 

But, the good news is that there are corporations taking control of payment receivables, with some reporting astounding auto cash rates between 80-100%.

Improving cash application and hit rates provides significant cost savings and efficiencies, and is indicative of a high performing receivables process.  The collaborative survey by NACHA and the Credit Research Foundation pinpoints the 7 key differentiators between high and low performing organizations with respect to cash application hit rates.  The high performers’ hit rates were 80% and above; the low performers’ hit rates were 0-20%.


Seven Ways to Slay the Receivables Nightmare and Rescue Cash Application


High Performers

Low Performers

1. Negotiate payment type


Specify or request ACH payments in credit and customer negotiations.


Let customers decide how to pay invoices.


2.Track payment metrics


Develop and track measures to monitor payment acceptance costs, operational performance and customer profitability.


Do not track payment costs, and are not sure how payment receivables costs impact customer profitability.


3. Payment type


Get paid via ACH.


Get paid by check.


4. Set receivables goals


Define goals and provide appropriate resources.  Increasing ACH payments is a common goal.


Do not set receivables goals with respect to payment types and cash application hit rates.


5. Work with bank and vendor for information feeds


Receive remittance advice feeds directly from their banks or payment vendors, which can be automated.


Receive remittance via email and mail, which are difficult to automate.


6. Use standards


Receive payment remittance details in standardized formats like EDI and BAI2, which improves hit rates.


Get remittance in non-standard PDFs and spreadsheets, which adds processing costs and decrease hit rates.


7. Adjust attitude


Embrace ACH and other pathways, and report being much more satisfied with their receivables operations. 


Are more likely to be dissatisfied with their receivables operations. 




Offering:   Download the 7 Pathways flyer

Topics: Accounts Receivable

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