CREDIT MANAGEMENT
The Pitfalls Of Manual
Cash Allocation
By Wasilwa Miriongi
O
ne major reason for slow payment
is inefficiency on the part of the
lender, it may result from not
giving the right amount payable by the
customer, manual cash allocation is the
reason behind some of these inefficiencies
that no doubt mar credit management
activities in an organization.
At most companies a clerk matches a
supplier invoice to a company purchase
order and a receiving document in order
to ensure that the correct quantities (and
costs) ordered are the same ones received
and billed.
Generally, this is a slow, painful and
inefficient process, while, bearing in mind
the large number of documents that are
involved, as well as the startling number of
exceptions that nearly always arise.
As a credit professional, I have on several
occasions, followed up for payment of
an invoice only to be confronted by an
angry customer that the amount you are Many people working in collection
asking for was paid long time ago. Some department are not new to these operational
even go to the extent of branding your challenges, here are the most common:
organization fraudulent or inefficient.
This may generally be so because of
Customer claiming ‘we have
manual cash allocation.
I remember my first job in credit
department we had very big manual
debtor’s ledgers that we used to fill in
from the Cash Book and it was not a walk
in the park. It was common for some items
to be missed out and long reconciliation
of account items was the order of the day.
There are instances where a delay in
allocating multiple customer payments to a
single invoice might inadvertently place the
customer account on hold. This is a perilous
situation to find yourself in; the customer
knows they have paid you in full, but the
accounts department simply has not caught
Manual cash allocation remains a up yet.
significant headache for businesses. When
remittance for an invoice arrives in stages Similarly, there is nothing more
or so called stage payments (for instance, uncomfortable for credit control than
the first as a BACS payment and the chasing a payment that has already been
second as a cheque), tying it all together received in fact it is a time wasting act.
manually is a thankless task. Worse
still, the delay in allocating payments What follows is a fractious conversation
to invoices will cause major operational that may dent the customer relationship.
It will impact productivity, too, as credit
issues.
control spends valuable time investigating
the disparity. Remember collection has cost
element attached to it therefore it will be a
costly exercise as well.
There are instances where a delay in allocating
multiple customer payments to a single invoice
might inadvertently place the customer account
on hold. This is a perilous situation to find your-
self in; the customer knows they have paid you
in full, but the accounts department simply has
not caught up yet.
76 MAL24/18 ISSUE
paid’
The old processes inhibiting
growth
There is a common phrase that goes “old
habits die hard”. If cash allocation in your
business relies solely on manual processes
and a mixture of paper and digital records,