Optimizing cash application KPIs with AI-powered automation

For finance leaders, cash application key performance indicators (KPIs) have become essential tools for measuring your accounts receivable (AR) process. They are more than just numbers – they are your secret weapon for supercharging efficiency and getting cash in the door faster. These metrics provide insights into your cash conversion cycle, directly impacting your bottom line as your organization transforms invoices into available funds. As finance teams face increasing pressure to do more with less, monitoring and optimizing these KPIs has never been more important.

Here's where AI-powered cash application KPIs really shine. They're changing the game for how finance teams keep costs down, speed up cash flow, and even make customers happier. AI-powered solutions not only track your metrics, but actually uncover hidden opportunities for huge financial wins. Take one of our Billtrust customers, for example—a leading packaged ice manufacturer: They achieved an 85% match rate for both lockbox and electronic payments through automation, showing the transformative impact of technology on KPI performance.

Essential cash application KPIs for modern finance leaders

As a finance leader, it's all about focusing on the right KPIs. These key metrics provide a complete view of your cash application performance:

Straight-through processing (STP) rate

This is a core metric that tells you the percentage of payments that go straight through, from the moment they arrive to when they're applied to an account, without anyone having to touch them. Higher STP rates indicate lower operational costs. While many companies hover around 60-80%, the top performers, especially those using AI, are often hitting — and even beating — 90%. AI-powered solutions can significantly bump up your STP rate by learning from payment patterns and continuously improving match algorithms.

Average time to apply cash

This KPI tracks how quickly your team processes incoming payments and applies them to customer accounts. Cut down this time, and you directly impact your working capital, freeing up funds quicker for investments or to pay down debt. AI automation can slash average processing time from days to hours or even minutes.

Exception handling rate

Exceptions are those perky payments that require manual intervention to be properly applied. Tracking the percentage of exceptions and the time needed to resolve them highlights process inefficiencies. Finance teams should aim to reduce both the volume of exceptions and the time spent resolving them.

Cost per transaction

This metric calculates the total cost of applying payments divided by the number of transactions processed. By monitoring this KPI, you can quantify the direct financial impact of your cash application automation initiatives.

Days Sales Outstanding (DSO) impact

While DSO is influenced by multiple factors, cash application directly impacts this metric. Faster, more accurate cash application leads to more accurate credit decisions, enabling proactive collections efforts and ultimately reducing DSO.

After implementing Billtrust's automation solution, Anda, a medical distributor, saw their card processing rates drop from 2.9% to 2.1%, contributing to annual savings of $110,000. The company processed 3,000 electronic card transactions in just six months—nearly matching their previous annual total.

Read our blog → Use Cash Application Analytics for smart matching

Cash application process metrics

Looking at individual performance metrics for your cash application process gives you even finer-grained insights into how efficient you're being, and helps you pinpoint exactly where to make improvements:

Invoice-to-remittance match rate

This KPI measures how successfully your system matches incoming payments to corresponding invoices. AI-powered systems excel at improving this metric through pattern recognition and continuous learning, even with complex or incomplete remittance information.

Payment channel metrics

By tracking the performance of different payment channels (ACH, credit cards, checks, etc.), you can identify which methods deliver the best results and encourage customers to use preferred channels. Each channel has unique processing requirements that impact cash application efficiency.

Resource allocation metrics

Monitoring how your team allocates time across various cash application tasks highlights opportunities for process optimization. Leading organizations track the percentage of time spent on manual vs. automated work and strive to shift resources toward value-adding activities.

Electronic adoption rate metrics

The percentage of customers using electronic payment methods is a strong indicator of future success. Higher electronic adoption typically correlates with improved cash application performance and reduced costs.

"Working closely with the Billtrust eSolutions team, we have helped our customers adopt online payments and strategically converted them from paper to email billing." — Director, Accounts Receivable at a leading packaged ice manufacturer that achieved a 530+% year-over-year increase in customer portal payments.

Monitoring and enhancing cash application performance

Turning KPI data into actionable insights requires the right approach to measurement and analysis:

Setting realistic benchmarks

KPI monitoring begins with establishing realistic benchmarks based on your industry, business model, and customer base. Rather than applying generic standards, tailor your targets to your specific circumstances while still pushing for continuous improvement.

Tools for tracking cash application KPIs

Modern AR platforms provide built-in analytics capabilities that make KPI tracking straightforward and automated. Look for solutions that offer customizable dashboards, automated data collection, and drill-down capabilities for deeper analysis.

Real-time vs. historical reporting

While historical reporting provides valuable trend analysis, real-time monitoring enables immediate response to emerging issues. A balanced approach combining both perspectives delivers the most value for finance teams looking to optimize their processes.

AI-powered analytics

AI transforms performance monitoring by identifying patterns and anomalies that might escape human notice. These insights allow for proactive optimization rather than reactive problem-solving, fundamentally changing how finance teams approach performance management.

Creating executive dashboards

Developing dashboard views specifically tailored to executive priorities ensures that leadership has visibility into the metrics that most directly impact strategic goals. Focus on connecting cash application KPIs to broader financial outcomes that resonate with C-suite concerns.

Strategies to improve your cash application KPIs

With the right metrics in place, these strategies can help drive continuous improvement:

Implementing AI-powered match rate optimization

AI-based matching engines analyze payment and remittance data to identify connections that rule-based systems would miss. These solutions continuously learn from your unique invoice structures and customer payment behaviors, improving match rates over time without requiring constant rule updates.

Increasing electronic payment adoption

Strategically shifting customers to electronic payment methods improves multiple KPIs simultaneously. Targeted customer campaigns can drive adoption while demonstrating the mutual benefits of digital payment options.

Streamlining exception management workflows

Redesigning how your team handles exceptions can dramatically improve processing speed and accuracy. Automated exception categorization, intelligent routing, and standardized resolution processes all contribute to better performance.

Training and resource optimization

Investing in team training ensures your staff can leverage automation tools while handling complex exceptions that require human expertise. This balanced approach maximizes the value of both technology and human capabilities.

Integration with other AR processes

Cash application doesn't exist in isolation. Integrating with invoicing, collections, and credit processes creates a unified AR ecosystem that improves performance across all functions. Coordinating cash application with accounts receivable debit or credit processes ensures accurate customer balance management and improves financial accuracy across systems.

Read our blog → Comprehensive reporting can supercharge your cash application team performance

The Billtrust advantage for cash application KPIs

Billtrust's AI-driven Cash Application solution directly impacts key performance metrics through:

• Confidence-based matching that delivers industry-leading match rates.
• Machine learning that continuously adapts to your unique customer payment patterns.
• Fast exception handling with smart suggestions that accelerate resolution time.
• Electronic payment support across all channels.
• Self-serve analytics that provide actionable insights into cash flow metrics.

The unified AR platform approach integrates cash application with other processes, creating an experience that maximizes efficiency. This integrated receivables approach enables performance insights that span the entire order-to-cash cycle, providing a more holistic view of financial performance.

Billtrust is a leading provider of order-to-cash solutions, helping businesses streamline their accounts receivable processes to control costs, accelerate cash flow, and improve customer satisfaction. For over two decades, we've empowered financial leaders with innovative AI-powered technology that transforms how organizations manage their entire AR lifecycle. Our unified platform processes over $1 trillion in invoice dollars annually for 2,400+ customers worldwide, delivering industry-leading automation across credit, invoicing, payments, cash application, and collections.

As AR automation experts, we combine cutting-edge technology with deep financial expertise to address your most challenging payment complexities. Our solutions are purpose-built to integrate with your existing systems, offering real-time visibility and actionable insights that drive strategic decision-making.

Ready to transform your cash application performance? Schedule a consultation with our team to learn how Billtrust can help you optimize your cash application KPIs and drive measurable financial results.