India’s Micro, Small, and Medium Enterprises (MSME) sector plays a vital role in the economy, contributing to over 30% of the GDP and providing employment to over 110 million people.

However, MSMEs in India face several challenges, including their vulnerability to business risks. 

To mitigate these risks, MSMEs must deploy the right digital solutions.  

Digitization offers several benefits, including generating e-Invoices, e-way bills, timely GST input tax credit, complete quotation & invoice visibility, timely dispute resolution, and back-to-back tracking of warranty replacements. 

Collaboration between stakeholders, both inside and outside the organization, is a key factor that can help MSMEs in their digitization journey. Such collaborations can create a positive ecosystem that fosters innovation and growth. 

Although MSMEs may perceive digitization as an unwanted expense, it is essential for them to embrace it to mitigate risks and grow their businesses.  

By partnering with the right vendors who provide the best digital solutions at reasonable costs and excellent support, MSMEs can streamline operations, reduce costs, and mitigate risks. 

In conclusion, MSMEs in India must invest in digitization and view it as an investment in their business’s future rather than an expense.  

It’s time to embrace digitization wholeheartedly, collaborate with stakeholders, and thrive in today’s competitive business environment. 

Are you eager to discover more about our innovative solution? Don’t hesitate to reach out to us! Our team of experts is thrilled to offer you a complimentary workshop where they will demonstrate the solution’s capabilities and answer all your questions. Don’t miss out on this fantastic opportunity to see the solution in action – contact us today! 

The vendor payable process involves managing the payment of goods and services received from suppliers or vendors.  

While the process may seem straightforward, there are several challenges and risks involved that can impact a business’s financial health and reputation.  

In this blog, we’ll explore some examples of how businesses can manage the challenges in vendor payables using technology and automation. 

Challenges	Solution
Manual process:   Manual processes are slow, inefficient, and prone to errors.   This can cause delays in paying invoices and damage vendor relationships.	Use an electronic invoicing system that accepts invoices from vendors electronically.  Set up workflows to automate invoice approvals and minimize manual intervention.  Integrate the electronic invoicing system with accounting software to accurately track expenses and payments.
Lack of visibility:   Without proper visibility, identifying bottlenecks, and preventing errors in vendor payables becomes challenging.   This results in inaccurate reporting and missed/delayed payments.	Implement a vendor management portal with self-service capabilities for vendors.  Integrate the portal with ERP software for accurate expense and payment tracking.  Encourage vendors to use the portal to manage their relationship with the business.
Payment fraud:   Payment fraud happens when fraudsters impersonate vendors or change payment information, causing fraudulent payments.   This results in financial losses, and reputational damage.	Choose software with built-in machine-learning algorithms to detect unusual payment transactions and flag them for investigation.  Choose flexible software that integrates easily with your accounting software and bank accounts to automate payments seamlessly, without requiring any manual input.
Compliance risks:   Non-compliance leads to fines, legal action, and damage to reputation.	Choose software that can monitor transactions for compliance with regulations.  Set up the software to generate reports that highlight compliance status and suggest areas for improvement.
Duplicate payments:   Duplicate payments occur when invoices are processed more than once, leading to financial losses, and inaccurate reporting.	Choose the software that should be capable of identifying & flag invoices that match previous payments.   It’s important to regularly review the software’s output to ensure that all invoices are being matched correctly.
Invoice errors:   Invoice errors, such as incorrect pricing, quantity, or taxes & duties, can cause issues with vendors, delay payments, and harm the reputation of the business.	Use invoice validation software that can automatically perform a 3-way match, comparing invoice details (such as pricing, quantity, and taxes) against both the purchase order and goods receipt note. This will ensure that all relevant information is accurate and validated.

In conclusion, managing pressures in vendor payables can be a daunting task, but technology and automation can help businesses streamline the process and reduce errors.  

Remember, it is crucial to choose software that is easy to use and manage, so that you can focus on what matters most – growing your business. 

Managing the vendor payable process is crucial for every organization. It helps to maintain good relationships with vendors and ensures the uninterrupted flow of goods and services.

Internal controls refer to the policies, procedures, and processes that an organization adopts to ensure ethical and compliant business operations while maintaining reliable and accurate financial statements.

The internal control team must have the authority to conduct audits and investigations of any area they consider necessary, report their findings and recommendations to senior management, and implement controls to reduce risks and enhance operations.

The following are some essential steps to establish a strong foundation by implementing intelligent internal controls in the vendor payable process:

 

1. Segregation of Duties:

To minimize the risk of fraudulent activities, the vendor payable process should be divided into separate and distinct duties.

For instance, one person handles vendor setup, another creates purchase orders, and a third person handles invoice processing and payment approval. Such division of responsibilities ensures that no single individual has complete control over the entire vendor payable process.

 

2. Vendor Onboarding Procedure:

Before setting up a vendor, the business should conduct thorough due diligence to verify its legitimacy.

This includes checking their business name, address, and tax identification number, as well as any legal or regulatory issues.

Additionally, the vendor’s contact information, terms of service, and necessary compliance certifications should be documented during the vendor setup process.

 

3. Purchase Order Process:

To make sure purchases are authorized and within budget, it is necessary to establish a formal purchase order process which must be approved by the relevant manager before any goods or services are received.

 

4. Invoice Processing and Payment Approval:

Once a vendor’s invoice is received, it should be matched against the purchase order to ensure that the goods or services were received as expected.

Once confirmed, the invoice should be approved for payment by the relevant manager.

 

5. Payment Execution:

Payments should be made only after proper approval has been obtained, and only to the vendor’s designated bank account.

The payment process should include verification of the vendor’s bank account information to prevent fraudulent activity.

Conclusion:

To be successful, organizations need to prioritize paying vendors smoothly and efficiently. They can achieve this by having strong internal controls in place, which reduce risks, improve compliance, and enhance efficiency.

When implementing new AP platforms, it is necessary to involve the internal control team. This ensures that appropriate business rules are in place, reducing risks, improving efficiency, and maintaining compliance.

The COVID-19 pandemic has affected the procurement-to-pay (P2P) function, leading organizations to rethink and transform their procurement processes. Organizations must adopt a continuous improvement mindset to build a resilient and efficient P2P function that can withstand future disruptions and consider key elements such as digital transformation, effective vendor management, remote work, sustainability, and contingency planning. 

Digital Transformation: The pandemic has shown the critical importance of digitization in the P2P function, including the use of vendor collaboration systems, digital payments, and automated workflows. Organizations must leverage digital technologies to streamline their P2P function and ensure business continuity. 

Contingency Planning: Organizations must have backup vendors, alternative supply chains, and risk mitigation strategies in place to address any disruptions that may arise in the future. 

Vendor Management: Effective vendor management involves identifying, evaluating, and managing vendors to ensure that they meet the organization’s needs and requirements. This includes vendor selection, vendor onboarding, performance monitoring, and relationship management. 

Sustainability: Sustainability is also crucial, and organizations need to ensure that their P2P function aligns with their sustainability goals. This includes working with vendors who adhere to sustainable practices, reducing waste and emissions, and implementing green procurement policies. 

Sustainability: Sustainability is also crucial, and organizations need to ensure that their P2P function aligns with their sustainability goals. This includes working with vendors who adhere to sustainable practices, reducing waste and emissions, and implementing green procurement policies. 

Continuous Improvement: Organizations must adopt a continuous improvement mindset for their P2P function. This involves regular monitoring of key performance indicators (KPIs), identifying areas for improvement, and implementing corrective actions to drive efficiency and reduce costs. 

In short, the COVID-19 pandemic disrupted the P2P function and offered an opportunity for organizations to transform their procurement processes to be more resilient against future disruptions. 

In today’s fast-paced business world, finance professionals managing Accounts Payable (AP) operations face growing pressure to streamline their processes and improve performance. They are repeatedly challenged to manage an increasing number of invoices with fewer staff and outdated technology.