Commuting Woes to Cash Flows

January 28, 2016

By Mike Packer

As the characteristic commuter, I’ve recently been struck by similarly-themed analogies between my drive to work and cash application. Seems like a stretch you say? Well, let’s take a drive and see. In my case the commute is about 15 miles. The first few miles are on local roads, with frequent stops for traffic lights and stop signs. This part typically takes about 10 minutes. Then it is onto an interstate, with a speed limit of 65 mph. Unfortunately, the interstate is poorly designed and there always seems to be heavy traffic on the first 5 miles, so about 15 more minutes are spent inching along. After the traffic bottleneck, the road opens up, and the last 5 miles of the interstate are covered in a mere 5 minutes. After exiting the interstate, it’s back to local roads with more traffic lights and stop signs, taking 10 more minutes to cover the last 2 miles to my destination. The net result: 40 minutes for a 15 mile trip.

How can my commute (i.e. the driving process) be improved? Hard to say, but what I will say is that increasing the speed limit on the interstate from 65 to 80 mph wouldn’t make a significant impact. Even if the speed limit was doubled to 130 mph, I’d hazard to guess that it would save only about 2 minutes on my commute time. You see, most of the time on the interstate I was in heavy traffic, going well below the posted speed limit.

Cash application has similarities to this commute. It has pieces that, like the interstate without traffic, are automated, and very fast. Payments received via wire or by ACH are like the wide open interstate. And the process of matching up the payments received to the advice notices are the equivalent of a daily traffic bottleneck; you’ll eventually get there, but it will be unpleasant. Meanwhile customers that pay some, but not all, of their many open invoices, or take invalid discounts, are equivalent to local roads. Typically time consuming, these payments need to be addressed in order to make meaningful improvements in the department.

When you think about your cash application process, focus on how to get rid of the bottlenecks. Have you figured out how to automate matching various payment channels to advice channels? Can you intelligently apply payments to the appropriate open invoices? What is your process for handling clients that take invalid discounts? We’ve spent years working on these challenges. While we can’t promise that every drive will be sunny with your favorite song on the radio, we have figured out how to eliminate almost all of the bottlenecks in cash applications.

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