Guide to vendor payment automation in Singapore

Apr 05, 2024

One of the foremost tasks of the accounts department is to clear bills and invoices that the company receives.

Vendor invoice payments processing is the last stage in a buying process which requires the buyer to pay for the goods/services rendered by the supplier company.

The commonly used modes to make vendor invoice payments in Singapore by businesses are credit cards, wallets, bank transfers, and cash. Not paying vendors on time can lead to broken and strained relationships with them.

This is why companies are moving to vendor payment automation solutions to pay vendors online on time. The automated vendor payment process makes the job easier for everyone involved.

New regulated Payment Services Act (PSA) in Singapore

Along with understanding modern payment solutions, a business owner in Singapore must also understand ordinances that the Singapore government has formulated to regulate payment service providers.

The Payment Services Act (PSA) is to regulate and streamline the mainstream and cutting-edge payment services offered in Singapore, which are running based on licensing.

The payment services are basically divided into designation regimes and licensing regimes based on their functionalities. The following are the ones that fall under the licensing regime

1. Account issuance services

Account issuance services denote the banking services that issue accounts to its users to manage payments online, or for utilization of any other banking operations. Eg. payment wallets.

This account can be also used to add or withdraw money or make cross border transactions. For a payment service provider to render this account to their users, they should have obtained a license according to the PSA 2019 Act.

They can obtain the license from the Monetary Authority of Singapore (MAS), which controls and regulates Singapore’s finances and monetary matters.

2. Domestic money transfer services

Domestic money transfer services mean facilitating sending and receiving payments within the country. For instance, payment gateway service providers, financial institutions, banks, and credit card companies.

MAS has made regulations for these local money transfer services and remittance agencies to not operate without obtaining the license.

Customers can report unlicensed banks and agencies to the Commercial Affairs Department or reach out to a nearby police station to prevent money laundering and fraudulent activities.

3. Cross‑border money transfer services

Cross border money transfer is provided by financial institutions, agencies, and wallet service providers in Singapore.

They help their customers in Singapore to send money to someone out of the country or receive money by charging the transaction and convenience costs.

Since cross border payments involve more risks like money laundering and terrorist financing, the regulations are stringent too. In order to actively provide cross-border payment services, the provider should be licensed. 

4. Merchant acquisition services

Merchant acquisition services include collecting and processing payments on behalf of the merchant. This is also regulated by the MAS as it falls under the financial services category and the provider should obtain licensing that abides by AML and CFT regulation

5. Digital payment tokens and money-changing services

The last category in the licensing regime is digital tokenized payment solutions and exchange services. This category of financial services includes platforms and companies that help customers to sell or buy virtual currencies in Singapore.

Money changing services denote the applications and agencies that help in the exchange of foreign currencies for the value of Singapore currency.

6. E-money issuance services

The PSL act is also applicable to e-money issuance services in Singapore. This denotes the financial service providers who lend e-money to merchants to pay vendors online or send money to someone.

Payments that will be under the withholding taxes

Withholding taxes is a customary term for non-resident companies doing business in Singapore and getting revenue from it. Commonly known as TDS in other parts of the world.

Wthholding tax is a part of the payment that a buyer from Singapore pays directly to IRAS (Inland Revenue Authority of Singapore) while processing the vendor invoice payment of a non-resident company.

This category of tax is applicable only under the following circumstances:

• When the income is derived from Singapore (either by supplying or selling goods)

• When the service is rendered in Singapore

Which companies are subjected to withholding taxes?

• When the company is incorporated in Singapore but major operations are handled outside Singapore

• Singapore branch of a foreign company

Other than vendor invoice payments, expenses like royalty and license fees, events and seminars conducted by foreign professionals in Singapore, coaching and consulting fees, etc. are subjected to withholding taxes.

What is the process for vendor payment?

Whether you have introduced vendor payment automation or not, the vendor payment process typically includes the following steps. 

1. Receive invoices from vendors

Right after placing your order or purchasing goods/services from your vendor, the accounts team raises you an invoice and sends it over with the payable amount and terms and conditions.

You receive it in an email as an attachment or via post, which you scan later and upload to your folders. The data from the invoice should be uploaded to your ERPs.

Your accountants can do this manually or you can have a data capture software do this for you. 

2. Calculating withholding taxes

If withholding tax is applicable for your payments, that must be estimated before rounding up the final amount to pay. The percentage of withholding tax is 15 to 22% of the total principal amount depending on multiple factors.

You must deposit the tax right away to avoid the penalty of an additional 1% tax on the total amount for every missed month.

3. Get approvals

If you automate vendor payments, right after inputting the vendor payment details, the bill will directly be passed to the pre-set approvers.

Accountants can follow up and get manual approvals too, but this will be time-consuming and not possible when you have a huge number of invoices to be cleared.

To have a streamlined vendor payment process, implementing a vendor payment automation solution is a must.

4. Pay vendors online through your preferred mode of payment

Once the green signal is obtained from the different levels of approvals, the payment can be initiated.

As a rule, Singapore companies make and receive payments using modes like credit cards, wallets, buy now pay later solutions, bank transfers, and cash.

You can also send a confirmation and acknowledgment receipt once the money has been debited from your bank account. This marks the end of the vendor payment process.

Manage your vendor payments with Volopay

So, it’s evident that vendor invoice payments can be quite a handful and even get out of hand if your invoice volume increases.

But companies in Singapore don’t have to suffer from chaotic vendor payment processing as there are plenty of technically advanced payment solutions in this country.

One such solution that will automate vendor payments for you without breaking your bank is Volopay. With Volopay, you can achieve more than vendor payment automation, and empower your finance and accounting team together.

Want to know more?

Create separate virtual cards for each vendor

Corporate cards are one of the most accepted payment modes in Singapore that work both physically and online. You can create unlimited virtual cards, assign one for each vendor, and use its card details for processing the vendor invoice payments.

These cards are very handy for both one-time and recurring payment usage. You can use them for making subscription-based payments. If you no longer need a card or temporarily pause a campaign, that card can be frozen.

Get detailed insights on spending

When you use different payment mediums to make payments, tracking also has to be done in different places. Volopay is a one-stop solution for all of your business payment needs.

You make all payments from one place and track them at the same time in the same application. At any given moment, you can gain real-time insights and the status of your payments.

You don’t just automate vendor payments but get to observe your payment habits and how well your budgets perform.

Lowest FX fees

While there are plenty of options available to make both local and international payments in Singapore, you will face unspoken issues like hidden charges, high fx costs, delayed payments or payment failures, and many such inconveniences.

You can rely on Volopay for making swift local and cross-border payments to your vendors with a transparent fx fee. Stop paying more for making payments by opting for a flexible payment platform Volopay.

Manage all vendors in a single dashboard

Handling vendor data and updating it on a regular basis could be a grueling task. Not if you have Volopay's vendor management system. Onboarding a vendor and managing all vendors within a single module helps in the vendor payment process as well as vendor management.

You can create, make changes, and delete with one click. So, you no longer have to struggle pulling up data from spreadsheets and uploading them into your ERP.

Send alerts before the due date

Missed vendor invoice payments can be embarrassing and if it continues, you will be imposed a fine. When your accounts payable is processing tons of invoices together, they cannot be held accountable for not remembering a due date.

Fix it with Volopay as it stores the due date and sends timely reminders to protect you from a penalty charge. By scheduling payments, you can pay on time and focus on other major tasks, erasing this off your memory.

OCR technology

Optical Capture Resolution (OCR) is capable of capturing data from a piece of hardcopy, organizing it, and loading it into a system.

When a vendor payment automation system has this, the accountants are freed from reading unintelligible invoices and typing them into the system.

This software scans the invoice and fills the data by itself. You can save a lot of time that gets wasted doing unproductive and monotonous tasks.

Concluding there are multiple stages in a vendor payment process. Even if one goes wrong, your payment won’t reach the vendor or even worse, reach the unintended person. 

Vendor payment automation is the best way to pay vendors online in the most streamlined fashion. Make use of modern payment software in Singapore to optimize your vendor payment process.

Automate you vendor payments instantly with Volopay