Blog > What is the Importance of Applied Cash?
What is the Importance of Applied Cash?
Cash application is an integral part of a business’s accounts receivable (AR) management and is essential for maintaining financial stability.
The process of applied cash involves applying customer payments to the respective invoices, helping to ensure a business’s books are accurate and up-to-date.
This article will explore the nature of cash application, including its importance and the process behind it.
What is cash application in accounts receivable?
Cash application is the process of accurately matching customer payments to their invoices and processing the payment so the money can be spent.
Cash application is essential to B2B transactions to ensure each transaction is fulfilled accurately. Businesses typically track three forms of cash application: invoices, payments, and remittances.
Traditionally, controllers and accountants manually completed cash application tasks, but this has quickly changed with commercial transactions growing in volume and complexity. Businesses have now turned to automated or hybrid cash application solutions to replace time-consuming and error-prone manual operations to improve accuracy, efficiency, and speed.
Before examining the overall benefits, it’s essential to understand each method of cash application — manual, automated, and hybrid — and its benefits.