How does Cash Application work in Tabs?

Cash application is the process of matching customer payments to the corresponding invoices. It’s a crucial step in the order-to-cash cycle that ensures payments are applied accurately and efficiently to the correct customer accounts. Tabs automates this process, helping companies manage cash flow and maintain accurate financial records.

Key Stages of the Cash Application Process

1. Receiving Payments
   Tabs receives payments from customers through ACH, credit card, or other methods via the customer portal. However, payments made outside of Tabs (such as ACH credit payments sent directly to your bank account) will not be automatically captured by the system and will require manual processing.

2. Identifying the Customer and Invoice
   Tabs identifies the customer making the payment and matches it to the appropriate outstanding invoice(s). This step is crucial when there are multiple invoices or payments involved.

3. Verification and Validation
   Payment details such as the payment amount, customer information, and invoice numbers are verified to ensure that the payment matches the correct invoice.

4. Applying Payment to Customer Accounts
   Once verified, the payment is applied to the correct customer account in Tabs, reducing the outstanding balance.

5. Reconciliation
   Tabs ensures that payments are reconciled with the company’s bank statements. This helps identify discrepancies or missing payments and ensures that all payments are accounted for.

6. Reporting and Documentation
   The cash application process is tracked and documented in Tabs, providing visibility into the company’s cash flow and ensuring accurate financial reporting.

Payment Matching in Cash Application

Payment matching involves associating a customer’s payment with the corresponding invoice. Tabs compares payment details—such as the payment amount, customer information, and invoice numbers—to ensure that the payment is applied to the correct invoice.

• Single Invoice Payments
  If a customer makes a payment for a single invoice, Tabs will automatically match the payment to that invoice and reduce the outstanding balance.

• Multiple Invoice Payments
  In cases where a customer pays a consolidated amount for multiple invoices, Tabs will apply the payment across the relevant invoices, adjusting the balance accordingly. Conversely, if multiple payments are received for a single invoice (such as from different entities within the same organization), each payment can be applied to the same invoice as it arrives. Applying payments immediately helps keep dunning reminders accurate by reflecting the current outstanding balance rather than the original invoice amount.

• Unapplied Cash
  If Tabs cannot match a payment to a specific invoice due to missing information or discrepancies, the payment will be categorized as unapplied cash. This will remain until further information is provided or the payment is resolved.

• Bank Fee Reconciliation
  When a payment is applied but a small balance remains due to bank fees, you can reconcile this by clicking 'Need to do something else?' > 'mark as done' on the invoice. Alternatively, you can create a credit memo for the bank fee amount and apply it to the invoice to mark it as fully paid.

• Payments Made Outside Tabs
  When customers make payments directly to your bank account (such as ACH credits) bypassing the Tabs system, these payments will not be automatically matched. The invoice will continue to show as 'pending' in Tabs. To resolve this, use the 'Record payment' feature on the invoice once you confirm the payment has been received in your bank account, or match the transaction when it appears in your bank reconciliation.

Handling Deductions and Disputes

Occasionally, customers may dispute or deduct amounts from their payments due to issues like product quality or late deliveries. Tabs allows users to communicate these disputes with customers and update the customer’s account accordingly, ensuring accurate records.