Cash Posting

What Is Cash Posting?

Cash posting is the process of entering payments received from customers into the business’s accounting records.

However, there is much more to the process than simply entering payment information.

In the modern era, payments can come in many forms, including check, credit card, and various forms of digital payment, as well as cash.

Much of this is done with the aid of computers, but there are many details that accompany payment which must be entered correctly.

Payments must be matched with the appropriate customer, invoice, and accounts receivable. The variety of platforms that transmit payment can make accuracy in this process complicated.

The process of applying payments to the correct account is referred to as cash application.

In cash application, accountants match incoming payments to outstanding invoices and to the proper account where they can be entered.

Cash application is an essential process for businesses to track cash flow and capital so that funds can be utilized efficiently, accurately, and quickly.

In What Context Is Cash Posting Used?

Cash posting is an essential function in the accounts receivable (AR) process. Accounts receivable, or AR, refers to money that is owed to the business.

This is for goods and services that have been provided, but for which the customer has not yet paid.

Cash posting is an integral function in the AR process because it allows the business to identify and assign incoming payments to the appropriate receivable, or unpaid, invoices.

Cash posting and cash application also impact a metric known as Days Sales Outstanding (DSO). This refers to the average number of days it takes a business to collect payment for products and services provided.

Cash posting and application are relevant to DSO because when done properly and efficiently, they help keep the average number of days to a minimum. The lower the DSO, the more efficiently the business is operating.

What Are the Challenges in the Cash Posting Process?

Cash posting poses many challenges in the digital world.

Payments can come in many forms, such as credit card, electronic debit, ACH, wire transfers, and checks.

Many of these transactions are transmitted separately from the information that details the transaction. Customers may also pay for multiple invoices in one lump sum, the amount of which will not match any one transaction in a company’s accounts receivable journal entries.

The growing use of web portals to process online transactions adds a layer of complexity to cash posting and application.

On the other hand, automation has also made it easier to match incoming payments.

Cash application software is capable of digitally capturing payments from a variety of sources, matching them to the corresponding invoice, and entering this information in the general ledger without the need for a human, or a team of humans, to do the same.

RELATED TERMS

Accounts Receivable
Cash Application
Cash Application Specialist
Cash Posting Specialist
Days Sales Outstanding (DSO)
Invoice
Remittance

FAQ

Why Is Cash Posting Important?

Cash posting is important because incoming cash cannot be utilized by the business until it is properly assigned.

The sooner cash is assigned to an invoice and an account, the sooner the business can use the cash for its ongoing needs.

Many functions of the business rely on the efficient utilization of cash for normal operation. Vital functions like payroll, rent and utilities, purchasing, investing, and capital outlays require cash.

A business with a quick and efficient cash posting and application process can run smoothly without delays, and it can grow more quickly. Cash posting should be done accurately and efficiently to allow a business to utilize its cash without delay.

Who Is Responsible for Cash Posting?

Cash posting in the business is typically performed by the cash posting specialist. The cash posting specialist is responsible for receiving and posting payments on accounts, as well as processing refunds and making adjustments to customer invoices.

What Documents Are Involved in Cash Posting?

All products and services that are provided by the business come with aninvoice. The invoice tells the customer what is owed and what product or service was provided that requires payment.

The invoice will provide the customer with other important information like payee, where payment should be sent, and when it is due.

The invoice is important to cash application because it helps the business identify the source of incoming cash.

Remittance refers to the payment that a customer pays to the business for the product or service received.

Cash posting and application helps the business assign remittances to their corresponding invoices and to the proper account(s) in the general ledger.

Accounts Receivable Automation with BlackLine

Request a demo and maximize working capital with the only unified platform for collecting cash, providing credit, and understanding cash flow. It’s time for modern accounts receivable.