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Cash Application

Definition

Cash application is the process of applying payments from customers to their invoices. It is a critical part of the accounts receivable process and is used to ensure that customers are billed correctly and that payments are applied to the correct invoices. Cash application is typically done manually, but can also be automated using software.

Example

Let's say a customer has an invoice for $500. The customer sends a payment of $500 to the company. The cash application process would involve the company applying the payment to the invoice, so that the customer's account is updated to show that the invoice has been paid in full.

Why it Matters

Cash application is an important part of the accounts receivable process, as it ensures that customers are billed correctly and that payments are applied to the correct invoices. Without cash application, companies would not be able to accurately track customer payments and could end up overcharging customers or not receiving payments for invoices. Additionally, cash application helps to ensure that customers are billed correctly and that payments are applied to the correct invoices, which helps to maintain customer relationships and ensure that customers are satisfied with their billing experience.

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