Answer
Unapplied cash is money received that hasn't yet been matched to specific invoices—often because remittance detail is missing or the payment doesn't tie out. It sits in a holding/suspense account, inflating apparent unpaid AR until resolved. Minimizing it keeps aging accurate and avoids chasing customers who have actually paid.
Real-world example A wire with no remittance sits as unapplied cash until the customer confirms which three invoices it covers.