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Most new releases of accounts receivable software include automated remittance batch processing (auto-remit) capabilities. Auto-remit invites you to import cash receipts as an electronic file, rather than manually entering them on-line. The development of this electronic file is usually outsourced to your EDI partner or lockbox bank.
The prospect of acquiring auto-remit capabilities is seldom a primary reason for installing new financial software. When accounts receivable software modules are being evaluated, auto-remit capabilities are often just another "add-on" or additional functionality that comes with the package. Not surprisingly, the attitude toward this feature often is, "now that we have it, let's try it. " Thus, the question of whether the benefits from using the A/R software 's auto-remit function justifies the expense of developing an electronic cash receipts file is a secondary consideration.
When the question is finally addressed, in most cases the answer will be yes. However, the economic incentive is usually small because few customers provide the correct invoice numbers with their payments or pay exactly the amount owed. Though A/R software can identify invoice numbers being paid when there is an exact match with the remittance data and determine whether a cash discount is for the correct amount and within terms, over 75 percent of cash receipts may still end up in the re-work file pending manual application. A/R software simply does not have the capability to drill down into both the remittance advice and the AIR open items database to find any matches that are not obvious.
This is where remittance-processing software earns its keep. Rather than relegate unmatched cash receipts to your A/R's re-work file, remittance processing software uses a customized battery of sophisticated matching algorithms to identify exactly what the customer is paying and then automatically process any needed credit or debit memos to finish the job. Without detailed system knowledge, it is difficult to recognize all the manual tasks an auto-remit application must replace in order to maximize cost saving and efficiency benefits. By analyzing the tasks performed during the cash application process, the underlying dynamics that enable remittance processing software to match over 90% of cash receipts with the unpaid items in your A/R each and every day can be fully understood