We visit a significant number of organizations each month to discuss collection processes and advise on improvement opportunities.

What we often see is that the Cash Allocation process is one of the significant challenges that is holding customers back from taking the next step to improving their collection processes - yet it is probably one of the simplest back-office processes to modernize and automate.

Why automate? Some of the inaccurate, time-consuming and cumbersome manual cash allocation process issues that we see are:
• manually printing, filing and/or later destroying emailed remittance advices
• manually maintaining Excel spreadsheets that cross-reference PAYEE NAME to CUSTOMERS.
• credit controllers distracted from core tasks at peak month-end times in order to help allocate and key cash into the financial system.
• having large quantities of unallocated cash
• customers failing credit checks due to unallocated cash issues
• customer monthly statements that are inaccurate, or having to be delayed until the cash can be allocated
• overtime paid, or staff working around the clock, to make this happen, doing lots of boring searches and manual data entry
• crucial cash allocation staff not being able to take leave, or highlighting a business risk when they are off sick or on holiday
• customers who are grumpy after receiving overdue payment reminder emails or phone calls, when they have in fact paid
• auditors making formal annual comments about the allocation process and related risks

And worse still, this imperfect process is repeated month after month.

Genuine Automated Cash Allocation processes can eliminate or significantly reduce the risks of manual cash allocation.
What is Cash Allocation Automation?
Automation, as the name implies, allows you to significantly reduce the amount of manual time and effort your staff spent allocating cash. This frees the collections team up to focus on the real task at hand - collecting the cash. So whilst you may only have a few people in the allocations role, and the peak times are only a few days a month, having a reliable, accurate and fast cash allocation process is the foundation for all other collection activity - and is an improvement opportunity that can have significant staff productivity and customer satisfaction impact.

There are automated solutions that are readily available and proven, that will:
• automatically monitor your Remittance Advice inbox, and process your remittances
• automatically download the electronic bank statement from your bank/s each day
• automatically match the payments to customers and the individual invoices that the payer has paid,
• allow you to do simple online customer and invoicing searching, to resolve payment anomalies
• integrate with your financial system , to automatically create and post the payment transactions, eliminating manual data entry
• automatically write off short-payments and over-payments (if told to do so)
• handle cheque deposit and payment gateway payments appropriately
• provide online query functions to allow you to view historical payments, allocations, who did them

What is "genuine" cash allocation automation
Like all automation options, there will be many claims of success.
Surprisingly, a large number of ERP/financial systems have no automation capability at all.
Some financial system will claim to have automated cash allocation, but on investigation that simply means matching the customer and applying the payment as "unallocated cash" onto the customer's account. In some cases that customer-matching only happens if the customer specifically puts information in a particular reference field and format when they make their payment. That doesn't always happen and is unreliable, and the effort required to train a customer base is significant.

Sometimes the financial system will only match to invoice level if the payment matches a single, unique outstanding invoice value.

"Genuine" cash allocation will match without intervention, across multiple customers, across multiple ERP/financial systems, to specific combinations of invoices and credit notes, to a high level, with confidence that there are no mis-allocations. The solution should have configurable "matching rules" to allow you to 'tune' the behaviour of the matching software to suit your particular business practice.

"Genuine Automated matching " needs to be measured in terms of both success and accuracy.
The last thing you need is for cash to start appearing on the wrong customers' account, or offsetting inappropriate invoices.

According to the Hackett Group (independent bench-markers of Enterprise efficiency - www.thehackettgroup.com)
• "basic" matching might achieve a 50% match rate (to invoice level).
• "World class" matching is considered 66% or above
• "Exceptional" matching is 85% and above.

With Rimilia Alloc8 we have customers who are consistently achieving rates of 85% to 90% plus, with complete accuracy.

The Business KPIs are:
• have at least 80% cash allocated before you walk in the door, with
• all allocations cleared and posted to invoices in the financial system by 9.00 am.
• Collectors having had their 'outstanding debt follow-up call" schedule adjusted with today's receipts before they start work - no wasted time trying to find out who paid today, no embarrassing customer phone calls to collect debt that has already been paid.

There are some normal business scenarios that will inhibit you ever reaching 100% matching, such as new customer acquisition, customers changing bank accounts, mergers and acquisitions, etc.
"Robotic Process Automation" ("RPA") is a term that you will probably encounter in investigating these types of solutions. RPA improves the automation match rate each month , by allowing the matching systemTrevor Middleton.JPG to "learn" how cash was allocated last time, then remember and re-use that for automation improvement when the next payment is received from that Payee.

So why should you automate cash allocation?
Having quality transaction processing gives your customer the faith that you are 'easy and accurate to do business with'. As a result, when it comes to a scenario where you have a genuine query with that customer, that reliability and trust makes them more understanding, and more likely to respond.

Apart from the normal imperative of delivering continuous improvement, here are some of the reasons that we hear for automation:
"Budgets are being tightened, we are constantly being asked to do more with less."
"With the increase of mergers and acquisitions we are faced with increase in transaction volumes, sometimes across multiple financial systems".
"We want a firm foundation on which to build our credit collections improvement."
"The New Payments Platform" is being launched next year, letting customers make almost real-time payments throughout the day - 24/7. And wanting to use their PAYID to do it! How will I keep up ?"
Automated cash allocation solutions like Rimilia Alloc8 allow that productivity and efficiency.
Where do I go if I want to know more?
Successful Cash Allocation automation projects are happening all over.
Average implementation times take 6 - 8 weeks, and can produce an ROI within six months or less.

For example:
"The whole project was a success from start to finish, and the benefits of Alloc8 started from day one. Our team is significantly more productive, and unallocated cash has reduced from over £6m to less than £60k, earning received from our external auditors"

Veolia UK - National Credit Manager.

For more information you can view the full webinar presentation on the AICM website (www.andrew.com) or visit the Rimilia Alloc8 website (https://www.rimilia.com/solutions/alloc8-cash-2-cash-allocation-software).

December 2017