The past year and a half have not experienced any kind of shortages in the technological transformations. Companies are increasingly adopting the process to make their accounts receivable through the digitization of cash applications.
Tim Stahl, the senior vice president of Vers pay, said that digitization of cash applications works as the key component for the cash workflow. It can decrease the days sold outstanding for the supplier up to 30%. It can help to eliminate short payments. In return, it helps revenues to get converted into cash in the coffers of a company. It frees up the finance teams to work on more strategic and impactful work.
Platforms that offer from Versapay allow its suppliers to start with the digital invoice. It further maintains a digital follow-up on the payments. At the same time, it sidesteps the paper checks, stamps, and envelopes. Suppliers can also see whether their customer has opened the email and interacted with invoices or not. They can also analyze, normalize and import all the unstructured data. Digitization of cash applications makes things easier.
Best practices are those when the AR process for a supplier and the AP process for the customer gets synthesized in one process. Here each of them can see what is going on both sides of the transaction. They can also participate collaboratively in the process.
By that time, there has been a decreasing reliance on paper checking and paper invoice in the form of payment. Though the transactions may get streamlined, reconciling them at the back office is challenging. But the digitization of cash applications can make things simpler.
AR management works as a contact flow for discrete tasks. Here each of the steps depends on its predecessors for creating a continuum to take incoming payments and then match them in the back office for the correct accounts. To operate in an optimal form, companies must retool their entrenched processes.
“There has always been tension in the fact that payments get deposited somewhere, and the details of those deposits come in another form” of communication, said Stahl on cash application.
The traditional methodology says that suppliers send a paper invoice and buyers send checks. Then the remittance paperwork starts taking place with a list of what needs to be paid. In case something does not match, the phone calls would start.
Hence if you are chasing your customer around, then you can go into your ERP system and relieve all the open invoices. The short payments might result, and then the finance team will need to open up for the investigations to find out what is missing and why which is another advantage of digitized cash application.
Hence he further noted that there are other changing power dynamics between the buyers and suppliers. It is getting deducted from the payments themselves. Suppliers who sell much larger customers can find payment terms getting dictated to them.
“Depending on what technologies you put between you and your customer, you can have lots of information you can’t have in an analog process, where paper is flying back and forth,” Stahl said on the digitization of cash application.