The invoice will provide the customer with other important information, like payee, where payment should be sent, and when it is due. The invoice tells the customer what is owed and what product or service was provided that requires payment. InvoiceĪll products and services that are provided by the business come with an invoice. The lower the DSO, the more efficiently the business is operating. Days Sales Outstandingĭays Sales Outstanding (DSO) refers to the average number of days it takes a business to collect payment for products and services provided.Ĭash application is relevant to DSO because it helps keep the average number of days to a minimum. The cash application specialist manages the cash application process, and is responsible for making the proper assignments for incoming cash to its corresponding invoice. This is for goods and services that have been provided, but for which the customer has not yet paid.Ĭash application is an integral function in the AR process because it allows the business to identify and assign incoming payments to the appropriate receivable, or unpaid invoices.
Accounts ReceivableĪccounts Receivable, or AR, refers to money that is owed to the business. You may encounter the following terms when considering cash application. This presents new challenges for organizations. The sooner a business can utilize its cash, the sooner it can pay salaries and bills, fill purchase orders, invest in other opportunities, and pay dividends to investors.Ĭash application is highly visible in the digital age because customers now have many different ways to pay for purchases. Incoming cash can’t be utilized by the company until it has been properly assigned. How Is Cash Application Used?Ĭash application is part of the accounts receivable (AR) process that applies incoming payments to the correct customer accounts and receivable invoices. It’s an essential way for businesses to track cash flow and capital so that funds can be utilized efficiently, accurately, and quickly. Cash application is the process of matching incoming payments to outstanding invoices and to the proper account where they can be entered.
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