July 14, 2021

Cash Application: Making the Most of Your Money

Every company wants to have money in the bank, cash on hand, and payments coming in the door. But what happens when there are too many payments coming in—or so many that they’re tying up accounting teams and slowing the process of turning those payments into usable, liquid income?

This is the case with many companies today. If they can’t apply incoming payments quickly and correctly, they can be exposed to a variety of problems. Inaccuracies might creep into month-end reporting, for example, or customers might exceed credit limits or have accounts erroneously suspended, thus damaging customer relationships.

BlackLine’s new Cash Application, a product of last year’s acquisition of UK-based Rimilia, anticipates these problems and goes a long way to help resolve them—even before they happen.

Machine Learning: How It Works

The application does this by employing a sophisticated machine learning architecture and intelligent rules to create matches of credits to invoices even in high-volume, complex accounts receivable scenarios.

In operation, the application takes in payment information from electronic payments, credit cards, and checks, either directly and/or using lockboxes. It stays in sync with the ERP by posting updates throughout the workday.

As payments come in, the application applies its rules to decipher information about which customer the account belongs to and which invoices the payment relates to. It manages things like deductions, tolerances, and taxes, and then applies the payments back to the ERP.

“The majority of payments, often more than 80%, are never touched by humans and are applied within the same day,” says Brian Morgan, BlackLine’s director of product marketing.

Morgan points to a financial services customer as an example of the application’s benefits.

“This company was able to reduce unapplied cash by 99% and cut the posting process from eight hours to 20 minutes,” he says, “and they achieved an 85% reduction in processing activities.”

Achieving Remittance Independence

A major benefit of BlackLine Cash Application is its ability to operate independently of remittance advices.

A remittance advice is a document—either electronic or paper—that the customer routinely sends to the vendor to list all the invoices that are being covered by a given payment. It’s a practice that worked well when payments were made by paper, with paper remittances accompanying the paper checks.

However, with today’s growing popularity of electronic payments, remittance advices often come in separately from the payments, leaving the vendor to try to sort out where payments should be applied without the benefit of the remittance advice.

“Thanks to the intelligence in our application, our customers can operate pretty much independently of the remittance advices,” says Morgan.

“Our customers can typically handle 80% of payments received without requiring the remittances, which will come later. This means they can apply the payments to the accounts and make use of that money faster than their competitors, who might be relying on the remittance advices before they can post their payments.”

Well Positioned for a Paperless Future

This remittance independence positions BlackLine customers well for the future of escalating electronic payments.

“There’s a shift underway now from check payments to ACH and other electronic payments,” says Morgan. “This means that remittance advices are less and less likely to accompany the electronic payments—something that will slow down companies that are still using manual methods for postings.

“By contrast, BlackLine Cash Application customers are well-positioned to take advantage of this trend, and to gain added competitive advantage as we move to a paperless future.”

Read our latest issue of BlackLine Quarterly for more stories like this that can help you move through the current disruption and into a more productive future.

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