The ultimate goal of accounts receivable isn’t complicated: accelerate cash flow
by ensuring payments are received and applied promptly and accurately. In that sense, unapplied cash might seem like no big deal—it’s sitting in your corporate bank account, after all.
But this “ghost cash” is far from harmless. It can wreak havoc on your AR processes in more ways than you might expect, such as by:
- Inflating cash balances artificially, providing an inaccurate picture of your true financial health.
- Distorting key metrics like days sales outstanding (DSO), hindering accurate performance tracking and forecasting.
- Frustrating customers with unnecessary payment inquiries.
- Creating inefficiencies for your collections team, forcing them to waste time chasing already-resolved or partially addressed invoices.
Fortunately, there's a powerful (and often overlooked) tool that can fix this bookkeeping headache: remittance data. Using it effectively can speed up cash application, cut down on errors, and keep your customers happy.
Why remittances are key
So, why are remittances so important?
Every unapplied payment has a story behind it. It might be a simple mistake, like a small business owner accidentally swapping a couple of numbers on an invoice. Or it could be something more complex, like a large enterprise sending a bulk payment without clearly specifying which of the 20 invoices it covered. Regardless of the reason, unapplied payments leave you with more questions than answers.
Remittance data is the key to putting these pieces together. But while it contains crucial details about how payments should be applied, actually making sense of it can be a pain in the neck. You’ve likely encountered situations like:
- Short pays: A customer pays less than the full invoice amount, usually due to a disputed charge or a misunderstanding.
- Bulk payments: A single payment covers multiple invoices, making it difficult to reconcile each individual transaction.
- Unidentified invoices: Payments arrive without clear instructions on which invoices they apply to, forcing your team to play detective.
- Credits: A customer uses a previously issued credit to offset a portion of their outstanding balance.
- Deductions: A customer deducts a specific amount from their payment, typically because of discounts, returns, or other agreed-upon adjustments.
The issue is that remittance information comes in all shapes and sizes. You might get a formal "promise to pay," a detailed breakdown of the payment, or just a quick email with a few scribbled notes. It can be hiding in all sorts of places, too: buried in emails or a pile of checks, trapped in PDFs, stuck in screenshots, or even lost in someone's overflowing inbox. This scattered, unstructured data makes manual processing a nightmare.
The remittance challenge
Having remittance data is one thing. Turning it into something you can actually use is quite another. Traditional methods like optical character recognition (OCR) tend to fall short—they’re good at pulling text out of documents, but struggle when faced with a wide variety of remittance formats. This is known as the "template problem": if the remittance doesn't perfectly match the pre-defined template, OCR breaks down.
This evolves into a nagging issue as your business scales. What works for a handful of remittances becomes a critical choke point as you start dealing with hundreds or thousands. When the technology fails, manual processing becomes the fallback, which is a costly, time-consuming, and ultimately unsustainable solution. Nobody wants to spend hours searching through emails, parsing PDFs and CSVs, or cross-referencing invoices to find the right data.
Modern solutions to common remittance issues
Unlocking the answers within messy remittance data doesn’t have to be frustrating or time-consuming. New technologies offer a better way forward.
1. Automated customer outreach tools
Playing phone tag with suppliers is a poor use of everyone’s time. With automated outreach tools, chasing down missing remittance information becomes a thing of the past. These tools proactively request remittance information, acting as a polite (but persistent) digital assistant. They take care of the heavy lifting via email templates, SMS notifications, and even chat-based interfaces to engage customers.
2. Digital payment portals
Think about how easy it is to buy something online as a consumer. A few clicks, and boom—your items are on the way. Why can’t the experience be just as smooth for B2B transactions?
With modern digital payment portals, it can. These systems are a far cry from the clunky, outdated portals of yesteryear, which more than three quarters of CFOs report fall short of their expectations. Designed with both user experience and efficiency in mind, modern digital payment portals simplify the payment process for customers while capturing remittance data along the way.
Here’s the beauty of it: as customers pay, they can easily select which invoices they're covering and allocate amounts to each. The portal automatically generates detailed remittance reports, eliminating the need for frustrating follow-ups and error-prone manual reconciliation. This clean, structured data flows directly into your AR system, ensuring payments are applied promptly and accurately.
It’s a win-win for all involved. Customers enjoy a frictionless, consumer-grade experience, and AR teams get the accurate, timely data they need to keep cash flowing.
3. AI assistants
Implementing your own modern AR portal is a step in the right direction, but it doesn’t solve a fundamental problem: accessing remittance data from your customers' various systems. AR teams still find themselves jumping between multiple customer portals, downloading countless files, and manually sifting through mountains of data. It's a tedious process that invites mistakes, and it only gets worse as payment volumes grow.
What's needed is a more versatile approach—one that can handle different data formats and portal layouts. Intelligent AI assistants are built to handle this kind of complexity. Because they’re not bound to a predefined set of rules, they can adapt to dynamic web pages and extract data from challenging formats like PDFs, emails, and even scanned images on the fly. And, once deployed, they work continuously in the background without your team having to lift a finger.
Google’s Project Mariner showcases how far this technology has come. Leveraging AI to interact with websites, Mariner acts as a virtual assistant, clicking buttons and collecting data just like a human would. This approach is part of a larger shift toward AI assistants that perform tasks traditionally handled by people with unparalleled accuracy.
The business case
Along with maintaining your AR team’s sanity, modern remittance solutions like these offer a set of significant business advantages:
- Improved automated match rates: A greater percentage of payments automatically matched to invoices minimizes manual intervention, speeds up reconciliation, and ensures cash application keeps pace with incoming payments.
- Enhanced customer experience: Streamlined payment processes and fewer inquiries leading to happier customers and, in turn, stronger brand loyalty.
- Better working capital management: Faster cash application directly translates to healthier cash flow.
Make cash application headaches a thing of the past
The more remittance data you have—and can actually turn into actionable insights—the stronger your cash application rates will be. AI assistants are the unlock the AR world has been waiting for to both collect remittance data and make sense of it automatically.
Curious to learn more about how these assistants work? Reach out to Stuut today and let us show you the ropes.