Artificial intelligence (AI) cash preservation: Expediting unapplied credit recovery to unlock hidden cash

By CJ Brennan, Audit & Assurance Partner, Deloitte & Touche LLP; Shreyas Rao, Audit & Assurance Managing Director, Deloitte & Touche LLP; Bezhan Tayebi, Senior Manager, Deloitte & Touche LLP

Talking points

• Many companies aren’t aware of the sizable credits that have accumulated on vendor books, often totaling millions of dollars in hidden cash.
• Emerging cash preservation technology enables internal audit teams and their advisors to efficiently identify and collect these credits.
• Deloitte’s cash preservation services, powered by AI and robotic process automation (RPA), can streamline credit recovery, enhance cash flow, and enable self-funding programs.

Realizing you have unapplied credits on your vendor account statements might seem like a minor accounting nuisance—just another disruption to your financial reports and cash flow tracking. But these credits can become much bigger headaches than most companies expect.

If not addressed, unapplied credits—and their causes—can strain vendor relationships, force tough staffing decisions, and add up to millions in delayed refunds or outright losses. For Fortune 500 companies and other large corporations, the impact can be staggering. One Deloitte technology client, for example, identified $27 million in unapplied credits across its vendors.

With so much at stake, it’s not surprising that interest is growing in cash preservation services. In this blog, we’ll take a closer look at these services—the benefits, enabling technology, and processes behind them.

What’s driving unapplied vendor credits?

Unapplied credits are amounts already recorded on vendors’ books but not yet paid out to customer accounts payable departments, negatively affecting company cash positions. These credits can remain on vendors’ ledgers for months or years.

Why does this happen? During the pandemic, many vendors, concerned about cash shortages, began holding onto credits to maximize their own cash flow. This approach has since become a standard practice for many. Unless specifically requested, these credits can be delayed indefinitely.

The unseen opportunity

Unapplied credits represent a major opportunity to recover large sums and improve cash flow. Yet they are often overlooked by companies that aren’t aware of the scale of the problem. Clues that you might have unapplied credit issues include moderate-to-high vendor spending, large and frequent invoice volumes, and belonging to industries or business categories at high risk for unapplied credits.

Tapping this hidden cash flow

Advisory and consulting firms like Deloitte can help companies develop cash preservation programs that expedite recovery, improve cash and credit management, and create self-funding opportunities. The programs can be implemented with minimal disruption to operations because they don’t require you to enact audit clauses.

As companies focus on cash flow optimization goals for stability and growth, cash preservation programs, led by internal audit, can provide hard dollars and ROI. They can enable internal audit—often seen as a cost center—to change the lens, retain staff, and demonstrate strategic value.

Game-changing technology: AI for accounts receivable

AI and RPA have transformed cash preservation programs and streamlined cash collection automation. With this technology, service providers can help large companies managing thousands of third parties automate the identification, communication, and collection of these delayed receivables.

Previously, this was a manual process handled in small batches of, say, 50 requests at a time, requiring significant staff hours to complete. Now, AI and RPA enable organizations to process up to 10,000 vendor r equests at once, dramatically improving efficiency.

How the process works

The cash preservation process typically involves:

• Scoping: Gather accounts payable spend data and supplier contacts, exclude out-of-scope entities, and prioritize high-risk suppliers.
• Customization: Tailor workflows for each vendor, including personalized communications and reminder settings.
• Execution: Launch outreach by sending batch requests, evaluating responses with advanced analytics, and following up with non-responsive suppliers.
• Enhancement: Address root causes behind large credit balances by collaborating with vendors and updating internal procedures like outdated contact management.

Real-world client cases and results

The benefits of cash preservation services are clear: accelerated payment of millions in credits, improved vendor relationships, more predictable cash flow, and self-funding programs. Consider the real-world outcomes in these Deloitte client case studies:

• Fortune 500 technology company: Remember the $27 million in unapplied credits we mentioned earlier? Deloitte developed a cash preservation program to recover these credits through a technology-enabled review process. Over 4,000 mailings have been issued, with more than 10% of vendors having credits on their books. The result: a recovery of $27 million.
• Fortune 500 energy company: An initial review identified $8 million in unapplied credits. Deloitte advised the company in establishing a dedicated cash preservation program focused on its chemicals business. Of 600+ accounts reviewed to date, 26% of the vendors had unapplied credits they had not notified the client of, resulting in the recovery of an additional $3.4 million.

What role can Deloitte play?

Deloitte can advise companies in developing cash preservation programs to unlock the hidden cash flow of unapplied credits. To learn more, contact your Deloitte representative. And don’t hesitate to reach out to us directly for more information.

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