What is Cash Posting?

Cash posting is vital for maintaining accurate accounts receivable records by accurately allocating payments to the appropriate accounts. The faster this process is completed, the sooner businesses can utilize the funds to meet their operational needs. Given the complexities of payment processes, the diversity of payment methods, and the high volume of invoices, many organizations now rely on cash posting software to automate and streamline this critical task.

What is Cash Posting in Accounting?

Cash posting is the process of recording incoming cash payments from customers and matching them against outstanding invoices in a company’s accounting system. When executed manually, the process can be complex as it typically involves reconciling payments received via various methods, such as electronic payments, checks, credit and debit cards, or ACH transfers. Each payment method necessitates a distinct posting procedure to ensure precision. For organizations with multiple subsidiaries, cash posting may also involve consolidating data from various sub ledgers into the general ledger. These complexities often render cash posting a time-intensive process susceptible to errors.

5 Key Steps in the Cash Posting Process

The cash posting process includes a few different steps to ensure accuracy and efficiency. However, manual cash posting can require the steps to be repeated, resulting in delays in cash posting and poor cash flow visibility. Cash posting automation software helps companies maintain accurate accounts receivable records with features that include real-time reconciliation, automation of the collections and payment process, effective identification and resolution of payment discrepancies, and automated remittance processes.

Receiving payments. Payments may come from customers in various forms, such as ACH transfers, wire payments, checks, or credit card transactions. These payments are recorded in the bank account or payment portal.
Identifying the payment source. Identify the payment source and the associated invoice(s) for each payment. This step often involves examining payment remittances, bank statements, or customer emails for details.
Recording and matching payments to invoices. Payments are recorded in the accounting system and matched to specific invoices based on the amount, invoice number, or customer account. The accounts receivable ledger is updated to reflect the received payment and the remaining balance.
Reconciling accounts. Payments may include deductions for discounts, chargebacks, or disputes. These require separate entries to adjust the outstanding balance correctly.
Reconciling bank statements. Finally, the posted payments are reconciled with bank statements to ensure all transactions are accounted for and no discrepancies exist. This should be done regularly to ensure accounts receivable is as up-to-date as possible.

Common Challenges in Cash Posting and How to Overcome Them

Budget constraints, resistance to change, and lack of awareness have led to many businesses to continue to rely on manual efforts for their accounts receivables, including cash posting. This makes the process more complex, time-consuming, and creates challenges that are typically eliminated when a business decides to automate cash posting.

Additional challenges include:

Delayed posting. Missing invoice information, data entry errors, and applying a payment to the wrong customer lead to delays in cash posting. In addition, complex customer transactions such as different payment methods or international transactions require different cash posting methods and attention to details. Integrating your cash posting automation software with additional financial systems helps ensure real-time data is accurate and the invoice information is matched correctly to the customer, reducing delays in posting.

Lack of integration with financial systems. When different financial data is located across different systems, it is almost impossible to have cash payment information available in real-time. Integration with financial systems allows for up-to-date payment data and increased visibility.

Missing, incomplete remittance information. Payments may lack sufficient details to identify the associated invoices (e.g., invoice number, account number, customer name), resulting in unapplied payments that delay cash posting. Self-service payment portals that require customers to submit payment and remittance information together and cash application tools that automatically match invoices to payments help solve this.
Customer disputes and complex payments. Deductions and disputes can delay the cash posting process along with partial payments and multiple invoices that are paid together. Automating the dispute management process and the payment reconciliation process speeds up the cash posting process while improving accuracy, leading to an enhanced payment experience for your customers.

The Benefits of Automating Cash Posting in Accounts Receivable

To solve these common challenges, many businesses choose to automate cash posting. This streamlines and optimizes the cash posting process while reducing costs and errors.

Other benefits include:

Improved cash flow visibility. When integrated into other financial systems such as the ERP, CRM, and accounting software, cash posting automation delivers real-time reports on cash receipts and A/R balances, providing businesses with more accurate cash flow forecasting. CFOs and financial teams can apply this data to make informed strategic decisions.
Reduced days sales outstanding (DSO). By promptly matching payments to invoices, businesses can speed up the payment reconciliation process. This helps businesses reduce the number of outstanding invoices, achieve lower DSO and maintain a steady cash flow.
Scalability. Automating the process allows businesses to scale without needing to hire additional staff to complete tedious and error-prone tasks. It can process greater transaction volumes more accurately, reconciling them across different payment methods while reducing administrative costs.
Enhanced customer relationships. When cash payments are posted accurately, payments and disputes are solved more quickly, leading to a better customer experience and higher satisfaction with your brand.

How Gaviti Takes Cash Posting Automation to the Next Level

Effective cash posting is essential for effective accounts receivable analysis, maintaining accurate financial records, enhancing cash flow visibility, and managing accounts receivable efficiently. Automation streamlines and simplifies the cash posting process, while improving its accuracy and efficiency and enhancing the customer experience.

Gaviti’s autonomous invoice-to-cash A/R management platform, however, takes automation a step further by eliminating the need for constant human control or supervision in the performance of tasks. This not only facilitates a more effective collections process, but streamlines the entire A/R lifecycle.

Its platforms delivers benefits such as:

Automated payment reconciliation that matches incoming payments with the corresponding invoices in real-time, delivering up-to-date visibility into your cash position.
AI-powered remittance auto-matching with cash application that delivers near 100% accuracy when used together with Gaviti’s Self-Service Payer Portal.
Up-to-date A/R data and reporting through the integration of different financial systems such as your ERP, CRM, and accounting software. It also centralizes your A/R data for easy access in one dashboard.
An enhanced customer experience with a Self-Service Payer Portal that offers flexibility in payment methods, including offering your customers a range of payment options, including credit cards, debit cards, ACH transfers, electronic payments, and more.
Quick resolution of disputes with real-time alerts and the ability to recognize trends, proactively avoid future disputes, and improve your cash flow.

Want to learn more about how Gaviti’s invoice-to-cash A/R management streamlines the entire accounts receivable process? Get a demo today!