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Every business owner is familiar with making vendor payments. But what about vendor payment automation?
If you consider business operations, it is one of the most important forms of cash flow. Every business makes use of a vendor’s service in one way or another – from workspaces to food providers. Especially if your business entails retail products supplied by your vendors, chances are your business already makes vendor payments regularly.
Either way, there’s a fair chance you have a system in place that tracks all vendor payment invoices. The next logical step is to disburse money (digitally or physically) timely to all your vendors.
This process is largely still dependent on a lot of manual efforts. When it comes to handling multiple payments and vendors, this isn’t a scalable process.
Before we move to understand how helpful vendor payment automation is, let’s understand vendor payments first.
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Vendor payments are also known as accounts payable or invoices to pay. It is the process of compensating the vendors for goods/service/value that they provide to your business.
Managing your accounts payable proactively can ensure that your vendors get paid on time without fail. This in turn can establish a great relationship between you and your vendors.
If you’re a small or medium business, you might make multiple vendor payments. In certain cases, you may have to do more than 1 of these payments daily if you’re looking to expand your operation and grow your business.
This means you cannot spend all your effort and energy on making payments. You need a system that handles this for you. You need vendor payment automation.
A regular, well-thought operation would look something like this –
We spoke to several businesses about their pain points of handling vendor payments daily. More than 70% of them faced similar problems. The problem is that the vendor payment process isn’t automated. The options available to them are behemoths like SAP, Oracle etc which don’t apply to small or medium businesses.
Small businesses do the following:-
All of these pain points are nothing but a huge opening for manually induced errors to invade the system. If left unoptimized, your accounts payable operation will one day fail to sustain. This is why you need a strong process for vendor payment automation.
Updating a spreadsheet manually is the most prone to mistakes. Even worse, you could even forget to add invoice details to the spreadsheet. A single mistake can have far-reaching consequences for your business.
This by far is the biggest pain point associated with vendor payments. You need to deduct TDS from your end before processing all the vendor invoices. It is no secret that TDS rates vary depending on the nature of the business.
Businesses calculate TDS manually at the end of the month and pay their dues to the government. Occasionally, an accountant is hired to do this job, which may increase human error
The processing of vendor invoices is very time-consuming if done via traditional banking channels. You have to start right from the scratch and add your vendor as a new beneficiary, wait for the beneficiary to get activated and only then be able to make a payment.
Expansion of business also means availing of services from more vendors. Keeping all records on a spreadsheet will not work in this scenario. Let’s remember that spreadsheets were created to easily analyze data – not store it.
Let’s face it – a spreadsheet isn’t the most secure option for you to be storing sensitive data on accounts payables. Even though there are ways to protect the spreadsheets, there are also loopholes to get past them. This makes it very difficult for the business to prevent fraud.
We understand cash flow. Karbon Payout is built to serve as an effective vendor payment automation tool that optimizes your time and money for your business.
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