Best Practices for SAP Cash Application Process in Accounts Receivable

Reducing costs is one of the main reasons why companies attempt to improve their accounts receivable order-to-cash cycles. However, it's complicated. According to Dolphin Corporation, "Accounts receivable is much more than just collecting what is owed. It has become a core business process." More importantly, accounts receivable is a customer-facing process. When approached the right way, the customer's experience can be enhanced and a relationship fostered. When approached the wrong way, it can prompt customers to start looking for a new vendor. To further complicate matters, numerous challenges exist. For example, some businesses consolidate their invoices when making a payment, and progressive discounts may be applied based on when the invoices are paid. Meanwhile, diverse payment types such as EDI, paper check, and credit cards require different settlement practices. With these thoughts in mind, use the best practices below to simplify and improve both the SAP cash application process in accounts receivable and your relationships with your customers. Capture check stub details from electronic images. Using scanners and optical character recognition (OCR) software allows you to capture remittance advice from check stubs electronically. Images of checks from the bank via lockbox or scanned at the desktop can be used. This steps eliminates the need for manually keying in the data and results in faster, more accurate processing. Convert captured invoice data into payment advice notes in SAP. SAP can automatically convert invoice data (such as invoice number, date, terms, and amount) into remittance advice. Again, this eliminates the need for manual data entry and improves accuracy. Match payment advice to customers' orders. Since invoice, customer, and payment advice data is linked, SAP can automatically match payment advice to customers' orders. Once posted in SAP, payment can be applied resulting in faster and more accurate processing yet again. Match payments to invoices. SAP can automate matching payments to invoices. Exact matches are easily handled by SAP while discrepancies such as overages, shortages, and write-offs are typically resolved based on algorithms, logic, and AR interventions. Situations that require review or approval are automatically flagged and any related workflows activated. Develop systems that can handle various forms of payment media. As paper checks become less common, other payment forms emerge, making payment processing a multifaceted process. Workflows and systems for each payment type must be developed so that payments are processed consistently regardless of how they arrive. Monitor performance. In order to ensure that the order-to-cash process is meeting its targets, it's crucial to monitor performance. Use reports to monitor the volume of payments received and applied as well as to identify issues that need attention. How does automating the order-to-cash process enhance customer relationships? An inefficient order-to-cash process can result in order fulfillment delays, incorrect orders, incorrectly applied discounts, incorrectly applied payments, or even unwarranted collections calls. By automating the process in SAP, these problems can be turned around to result in a better customer experience. For accounts receivable departments using SAP applications, Dolphin's Accounts Receivable solution suite provides the tools needed to automate the order-to-cash process. Use this suite to automate discrepancy management and gain insight into the process. Works Cited: 1. ReadSoft, "Five Steps to Best Practice AR Cash Application Processing in SAP," - http://www.readsoft.com/docs/default-source/resource-library/five-steps-to-best-practice-ar-cash-application-processing-in-sap_fl04 2. Citibank, "Best Practice in Accounts Receivable Reconciliation," - http://www.citibank.com/transactionservices/home/about_us/articles/docs/accounts_receivable.pdf 3. Dolphin Corp, "SAP Accounts Receivable Cash Application," - http://www.dolphin-corp.com/business-process-management/ar-cash-application/