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Increasing the Effectiveness of Automatic Payment Posting (AutoCash)

Introduction

A significant percentage of large corporations utilize highly advanced ERP systems, such as SAP and Oracle, which have AutoCash rules to determine how to automatically apply customer payments. These advanced systems use the customer’s open balance, along with the AutoCash rules set up in the ERP, to determine how to apply receipts and whether to allow partial payments to be applied.  Utilizing automatic payment processing tools, such as AutoCash, can be a great way to increase the productivity of the Customer Payment Processing organization and, yet, AutoCash application rates vary significantly across companies, even within similar industries.  

Some of the typical internal root causes and external behaviors that result in defects in customer payments versus billed amounts include:

  • Pricing errors
  • Tax rates/jurisdiction
  • Direct debiting too early/incorrect calculations
  • Short payments
  • Non-standardized customer rebates/discounts
  • Invoice numbers wrong/missing
  • Unearned discounts taken
  • Finance charges

To address many of these defects, companies have taken on a variety of initiatives, all of which have a common theme of working across the entire Order-to-Cash (O2C) process. They are starting with Sales and providing data that is granular enough to identify root cause defects by billing office or salesperson. For instance, monthly color-coded heat-charts indicate the billing accuracy of operations, with drill down capability to identify people in the organization who may need remedial training to assist in reducing the number of incorrect billings to customers.

Billing accuracy is a critical measure as it is directly correlated to:

Customer Satisfaction – Billing accuracy is a reflection of overall company competence.

Cash Flow – When customers are billed correctly, they tend to pay faster or at least on time. Incorrect billing gives them a reason not to pay.

Cost – When customers are billed correctly, they tend to pay what is on the invoice resulting in high matching in Autocash, along with reduced headcount in Accounts Receivable, as well as in Customer Service and Sales, related to dispute resolution.

iPollingTM Results Review

Utilizing Peeriosity’s iPollingTM technology, a recent poll looked at the current AutoCash rate for major companies across the globe.  The results were fairly even across the entire response key, with 15% experiencing a 90% or greater success rate, while 40% indicated that their rate is less than 60%.

The second poll question then addressed the issue of what is the biggest obstacle at companies in increasing their AutoCash rates.  The most prevalent response (53%) was the difficulty in getting the customer to provide sufficient information with their payment.  This was followed by 26% of the companies saying that special circumstances, such as discounts, complicate the payment application process.

Some of the Peeriosity member comments related to this poll include the following:

Manufacturing Member: Our card shops auto apply at a 95% rate, but the small mass accounts are less likely to pay full balances and/or they take deductions. The major mass customers are mostly EDI & the majority of those payments match, while we just work the exceptions.

Other Industry Member: Our corporate structure requires our customers to have multiple vendors established. The largest obstacle to increasing our hit rate is having our customers remit to the proper lockbox.

Manufacturing Member: We have two big issues to increase our AutoCash ratio: 1) difficulty in getting the customer to provide enough information with the payment and 2) system issues – as we have different systems in our company, and Gifco (SAP FI) on top of another ERP system, which triggers data transfer problems when we want to utilize the AutoCash.

Consumer Products & Services Member: Note, our response is for the US only. Canada and Puerto Rico currently apply cash manually, as we have not been able to payout a systems implementation to automate it yet.

Manufacturing Member: Deductions are the major reason we do not have a higher hit rate. Salesmen agree to special pricing and forget to notify our Pricing/ Rebate teams. This is just the nature of our business and I do not see this changing soon.

Non-Profit Member: Special circumstances (i.e. discounts) complicating the application process

Answers reflect established levels of service (LOS) where efforts were applied over a period of years with customers and bank lockbox staff to achieve.

Manufacturing Member: We have 2 big issues to increase our autocash ratio: Special circumstances (i.e. discounts) complicating the application process and difficulty in getting the customer to provide enough information with the payments.

Closing Summary

As outlined in this research abstract, there are a variety of reasons why a large number of companies continue to struggle with low AutoCash rates.  For many, the struggle will continue until a concerted effort is made to effectively track these exceptions, followed by careful analysis to determine the root cause of the issues they are facing.  Once that is completed, real progress can be made in this important area of Order-to-Cash. 

How effective is your AutoCash payment processing?  Is your current approach meeting your needs or is it time to take another look at this critical process area?

Who are your peers and how are you collaborating with them?

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 “iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility to all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in iPollingTM.

Peeriosity members are invited to log into www.peeriosity.com to join the discussion and connect with Peers.   Membership is for practitioners only, with no consultants or vendors permitted.  To learn more about Peeriosity, click here.



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