Vendor payment process and how to automate it?
The vendor payment process is an important part of a business’s accounts payable system. Generally speaking, when you pay a vendor or supplier for any goods or services that you have availed from them then that payment is called a vendor payment.
In the purchase-to-pay or procure-to-pay process of a business organization, the payment made out to vendors or suppliers is the final step. The process starts when a business places an order to purchase goods, services, or both from a vendor. This creates a purchase order for the supplier or vendor. Once this purchase order is fulfilled and the vendor provides the required goods or services they then send out an invoice to the client business.
Once the business makes a payment against this invoice it is called a vendor payment.
To understand what is vendor payment and why they are so important you must first realize how fundamental they are to the operations of a business. To run a business you need supplies and raw materials and the only way to get them is to either manufacture them yourself or take the help of external vendors. More often than not, the latter option is the preferred course of action for businesses.
Ensuring on-time and accurate vendor payments is essential to maintaining healthy vendor relationships. Systematic and prompt management of the vendor payment process is an important part of building and nurturing the relationships you hold with your vendors. Managing payments made to vendors effectively is even more important if any of the following predicaments apply to your business:
• As a firm, you have to work with many vendors regularly.
• You frequently have to pay vendors in different currencies
• Your firm has numerous branches from where payments are made.
• If there is any change in your credit period.
• You need to offset liabilities because you engage in the purchase and sale of goods with the same vendor.
• When you have to comply with the GST and MSME Act and make timely payments.
The Vendor payment process flow starts with the first step where the vendor sends an invoice for goods and, or, services sold to a client who collects it.
The second step in the vendor payment process flow is where after receiving the invoice the client verifies the invoice for accuracy and authenticity. You must vet the invoice for the accuracy of purchase descriptions, presence of authorized signatures, required details, and so on.
Once you have collected the invoice and verified for required accuracy you can then move on to making the journal entries about the invoice payment and recording the same in your accounting software. Once you have recorded the invoice another part of accounting the invoice is calculating any associated taxes.
Make sure you account for and calculate any taxes that apply to the payment of the invoice in question.
Next, TDS must be deposited to the government. This must be done within the due dates stipulated by the IT rules. You must also make sure to report any applicable ITC when you submit the monthly or quarterly GSTR-3B form.
Additionally, you also need to conduct a reconciliation of GSTR-2B and GSTR-2A with the purchase register, at defined intervals. In case there are any invoices that vendors have uploaded and you can claim ITC on them make sure you follow up and report them in GSTR-1.
Before the invoice can be paid the payment needs to be approved by an authorized approving authority from your organization. This step is essential to ensuring unauthorized spending is stopped at a very early stage. Companies may have different levels of approvers for differing cost levels as well. The main task of the approvers in this step is to make sure that the payment that is to be made is duly authorized.
The final step in the vendor payment process is where you make the actual payment. You can use any preferred payment method such as bank transfers, UPI, e-commerce payment gateways, cash, e-wallets, mobile payments, or any other mode that fits the requirements of both your business and your vendor.
Maintaining good vendor relationships is important to getting good prices, deals, and perks on purchases. A good vendor and business relationship not only ensures offers and perks but also timely deliveries, good inventory options and so much more.
However, managing vendor relationships with a manual system can be a difficult task. Vendor payment automation, on the other hand, can be the solution to seamless vendor management.
By consolidating all your vendors and purchases on one comprehensive platform, vendor payment automation software can make it much easier to manage and maintain healthy relationships with vendors.
Software and tools that help automate the process of paying and managing vendors also help you keep your business’s supply chain healthy. This software comes equipped with features that ensure on-time payments, which in turn ensures that there is no delay in obtaining supply from vendors.
When you manage vendors manually there is always the problem of late payments which then lead to delayed supply. With automation, this problem can be completely eradicated.
With vendor management and payment automation software, you can preset payment dates and timely alerts to ensure a payment date is never missed again.
Storing and managing data related to all the vendors you work with can be quite a challenging task. This problem can be especially pressing if you have a large company that works with a significant number of vendors regularly.
Traditionally, vendor data storage was done mainly with paper-based systems or excel sheets. This meant that the data was easily corruptible and susceptible to damage and misplacement.
Instead, if you use automation tools vendor data storage is done with the help of highly secure and easy-to-use cloud-based systems. These systems ensure complete security of data as well as easy accessibility.
Managing and paying all the vendors you work with can be a much easier task when you use automation.
Volopay is one such software that can automate your entire accounts payable process. From invoice receipt to vendor payments and even accounting and bookkeeping can be automated with Volopay.
Volopay is a vendor payment automation platform that also supports easy and seamless payments to vendors all over the world. This feature is especially useful if you frequently work with vendors and suppliers from different parts of the world.
You no longer have to manage multiple different accounts with multiple different currencies. Simply use Volopay to easily pay these vendors and make cross-border transactions with just the click of a few buttons.
Volopay provides the unique offering of unlimited virtual cards at no extra cost whatsoever. This means you can issue an unlimited number of virtual cards for a variety of purposes without having to pay any extra fees or charges. These cards can be used in many different scenarios, including as burner cards.
You can issue dedicated cards to each vendor you have to pay and set these cards to expire or ‘burn’ after payment is completed. This helps add an extra layer of security to company funds and prevents overpayment.
Volopay charges one of the lowest, if not the lowest, rates on international payments and transactions. Volopay’s $0 transfer fee and competitive FX rates can help your business save a lot of money on international transfers. This means that there is no SWIFT or processing fee charged.
The FX markup with Volopay is much better than what most banks offer. Moreover, there is transparency in terms of charges so that businesses know upfront how much they will pay, and how much their vendors will receive.
Poor invoice sourcing is often the reason why businesses pay invoices late and end up incurring late payment penalties. Different vendors may have different preferences when it comes to sending invoices. To avoid paying invoices late just because the document was not sourced on time you need to consolidate all your channels.
With Volopay’s three-way invoice sourcing you can receive invoices from email, the Volopay portal, and even your accounting software. All three channels are linked so that when you receive an invoice you are immediately notified and the payment process can get started.
Companies that work with a large number of vendors regularly might find themselves missing out on critical tasks now and then. Human error is inevitable and it makes its way into the invoice payment process as well.
To prevent late or missed payments Volopay comes with a feature that alerts required individuals to take action every step of the way. Notifications are sent via the mobile app or the Volopay platform to ensure the process of paying a vendor is on track and there are no delays.
Businesses typically lose a lot of time and resources in manually recording invoice data. Accounting or finance teams have to spend hours just going through piles of invoices and manually entering the data that is on the invoices.
Volopay’s OCR or Optical Character Recognition is a feature that can completely eradicate this issue. With the Optical Character Recognition feature at your disposal, all you need to do is click a photo of the invoice and simply upload it onto the platform. The OCR feature will automatically capture and record the required information from the uploaded image.
Typically, you would have to wait until the end of a week or month before you can obtain a full picture of your business’s spending behavior. While transactions take place in real-time recording and tracking the same in real-time is difficult to do manually.
This is why with Volopay you get a real-time expense visibility and tracking feature. With this feature transactions are recorded and tracked as and when they take place, in real-time.
As soon as your business makes a payment to a vendor the details of that transaction are immediately recorded and stored, and the status of the payment, too, is tracked up until the point of completion.
Accounting software is one of the most common tools that businesses use to manage their day-to-day bookkeeping operations. The problem with this is that when these companies onboard a new software it becomes difficult to integrate the pre-existing accounting software with the new software.
You may have to manually migrate all the data from the old platform to the new one. There may even be bottlenecks during the time of data syncing.
To avoid this issue Volopay is equipped to seamlessly integrate with almost every accounting software out there. Using a special feature called accounting triggers Volopay seamlessly syncs all your pre-existing data on the accounting software with itself.
Finance and accounting teams often have to manually enter and match data on both their accounting software as well as accounts payable software. This is especially true if your payment software does not come equipped with two-way syncing capabilities.
With Volopay important details like invoice date, vendor’s name, due date, quantity, item description, amount, and tax code, are all automatically scanned and synced to your pre-existing accounting tool. This cancels out the need for double data entry for your teams.
Approvals on payments are important to ensure that no unauthorized transactions go unchecked. They make sure that all company spending is authorized and that there is no fraudulent activity done using company funds. Manual approval systems, however, are infamous for being slow and error-prone.
To prevent this Volopay comes with a highly customizable, multi-level approvals system. You can use this feature to set different levels of approvals and approvers for different types of payments. Approvers are also duly notified by the Volopay platform to ensure there are no delays.