Cash application is the accounts receivable process of matching each incoming customer payment to the open invoices it settles, then posting it so those invoices are marked as paid in the ledger.
Cash application draws on three inputs: the payment line from the bank feed, the remittance advice sent by the customer when there is one, and the list of open invoices. In French practice, the same operation on customer accounts is called lettrage.
Cash application fails on four recurring cases:
- a payment arrives without any invoice reference, or with the customer's own order number instead
- one transfer settles several invoices, sometimes net of credit notes
- a customer short-pays and deducts a penalty, a rebate or a disputed amount without notice
- a payment comes from a parent company or a factor rather than from the invoiced entity
Each unresolved case leaves unapplied cash, money received but not allocated to any invoice. The consequences stack up: the invoice remains open, days sales outstanding looks worse than reality, the collections team chases a customer who has already paid, and the aged balance loses credibility. Two indicators track the health of the process: the auto-match rate, the share of payments applied without human intervention, and the unapplied cash balance at month end.
Phacet applies payments with AI Match, which compares amounts, dates, customer names and free-text references semantically rather than requiring an exact invoice number. The agent that can automate French-style account matching posts the matches, and partial payments or deductions are surfaced as exceptions with their probable reason. Upstream, a virtual IBAN per customer removes much of the ambiguity.
