India’s SME vendor payouts landscape is growing rapidly. According to reports, India has around 3.3 lakh businesses qualifying as small businesses and 0.05 lakh businesses qualifying in the medium segment.
The advent of digital payments and digital transformation is playing a major role in accelerating business growth for SMEs. However, SME vendor payouts continue to be an area of concern. Even today, many businesses continue to use bank transfers to facilitate vendor payouts.
This approach, however, comes with limitations. One’s bank of choice, however, may not be able to facilitate bulk payouts. Single banking partner dependency can also be risky when, say, a bank account is blocked.
Delays and errors in payouts to vendors can take a toll on businesses. They can disrupt the supply chain. Poor payout solutions can also result in non-compliance with tax regulations, which is a business risk.
In this blog, we outline key challenges associated with SME vendor payouts and how innovative technology can help businesses bring efficiency to this function, especially as they scale.
What are SME vendor payouts?
SME vendor payouts refer to the payments made to vendors by small and medium-sized businesses for services rendered or goods delivered.
Vendors play an important role in the success of a business. They are part of the supply chain for businesses of various scales, ranging from manufacturing and wholesale to retail and service providers.
Paying vendors on time, accurately, and efficiently is a best practice for any growing, thriving business. However, as businesses scale, it becomes more challenging to facilitate timely payments. This is where superior payment solutions can make a difference.
However, many small and medium-size businesses are yet to make the switch to efficient SME vendor payment solutions, due to a lack of awareness. Let’s understand current challenges and the way forward.
Current challenges with SME vendor payouts
Today, businesses face the following SME vendor payout challenges as follows:
- Many businesses continue to use manual processes to facilitate vendor payouts. This approach results in miscalculations, errors, omissions, and delayed payments.
- Businesses are unable to facilitate bulk payments. This is a necessity, especially as the vendors and the volume of products/services provided by them scale. The faster businesses scale, the more challenging it gets.
- The use of spreadsheets and free-to-use tools do not always ensure data security, and sensitive financial information can be compromised due to data breaches.
- Business taxation regulations are getting more stringent, and businesses must be able to comply to avoid penalties and audits. However, manual interventions can result in tax compliance issues.
- Facilitating SME vendor payouts via one’s bank comes with the disadvantage of single banking partner dependency. Vendor payouts can be delayed if the account gets blocked or the bank account is undergoing maintenance.
- The market is flooded with complex and costly API (Application Programming Interface) solutions, which make it difficult for businesses to navigate SME vendor payouts efficiently and cost-effectively.
Addressing challenges with technology
To address the multitude of challenges, SMEs can benefit from the transformative impact of integrating a cloud-based, enterprise-friendly payout solution, which enables efficient SME vendor payouts.
This solution is especially designed to enable businesses to make vendor payouts, efficiently, accurately, and on time in a cost-effective manner. The software is fully automated, data-driven, and built with develop-friendly APIs. Businesses can quickly onboard new vendors and kick off SME vendor payouts without delays.
An additional benefit is that this solution can also be used to facilitate other payout categories such as employee salaries, cashback and incentives, and customer refunds.
Features of superior SME vendor payout solutions
A superior enterprise-friendly payout solution comes with the following features, benefiting small and medium-sized businesses:
Facilitate bulk vendor payouts
Businesses can facilitate bulk payments to multiple vendors at one time. For instance, Plural Gateway, a superior enterprise-friendly payout solution, enables businesses to schedule payouts in advance to avoid chaos and ensure on-time, accurate payouts.
Facilitate instant payments
Instant money transfers by bank can be costly, especially for small and medium-sized businesses. They also take time to add beneficiaries, which can be a setback for businesses.
However, solutions like Plural Gateway allow businesses to add beneficiaries instantly and cost-effectively make real-time SME vendor payouts.
Automated verifications
A superior SME vendor payout solution facilitates the automatic verification of bank accounts and Virtual Payment Addresses (VPA). This is an important step that ensures that funds are transferred to the right accounts. Errors can make it challenging to retrieve misdirected funds.
Reconciliation support and customer service
Despite all measures to ensure smooth payouts, there is potential for things to go wrong. For instance, vendor payouts can result in invalid transfers. A superior payout solution comes with automated reconciliation support.
In-depth data analytics
As businesses continue to facilitate payments, they can access valuable data, which can be spliced and diced to make smarter business decisions. Businesses can access all data from a single dashboard and access data quickly based on their needs.
Multiple payout modes
Vendors can be paid via their bank accounts, UPI, cards, or digital wallets, as per their preferences. Vendors can also receive payout links where they can add bank or UPI details and receive instant payouts.
High data security
With so many vendors sharing sensitive financial data, it is important for businesses to ensure data security. Superior SME vendor payouts solutions are compliant with payment regulations and prioritize vendor data security.
The takeaway
Efficient, timely, and concise SME vendor payouts will play an important role in the success trajectories of small and medium-sized businesses that wish to scale quickly and capture more market share.
A superior payment gateway enables SMEs to automate the process end-to-end, stay compliant, and pay vendors as per their needs. This is an error-free approach that reduces manual interventions in the SME vendor payouts function.
Small and medium-sized enterprises can partner with an innovative payments technology specialist and streamline vendor payments so their teams can focus on more strategic tasks.
Plural Gateway offers a wide range of payout solutions, including streamlined SME vendor payouts, customer refunds, cashback and incentives, loan disbursals, and salary payouts to employees, with reconciliation back-up and high data security.
Our payment gateway also enables businesses to boost customer-centricity by offering a wide range of payment options, including multi-channel payment links. Plural’s versatile affordability suite comprises a robust EMI engine (cardless, debit card, credit card, and brand EMIs) and Buy Now Pay Later.
Industry-standard security systems back Plural Gateway to protect sensitive customer data. With Plural Gateway, businesses can access a hassle-free integration experience and round-the-clock tech support. To learn more about Plural Gateway, write to us at pgsupport@pinelabs.com or click below to get in touch with us.
Plural by Pine Labs has received an in-principle authorization from the Reserve Bank of India (RBI) to operate as a Payment Aggregator.
