The efficiency of business operations, especially on the supply/acquisition side, relies on automated vendor payouts. However, even though the digital revolution has transformed payment systems, there are still certain challenges that stunt progress.
Studies show that B2B enterprises wait nearly 40 days to receive a payment. This lack of immediate liquidity creates cascading delays in further processes of the business, impeding growth and straining partnerships. Additionally, an average business takes roughly 10 days to process a single invoice, which can become problematic with the increasing number of vendors and partnerships down the line.
It is here that automated vendor payments can drastically improve the turnaround times of vendor payouts, helping foster healthier business partnerships and associations between two organizations.
Let’s explore the benefits of automated vendor payouts and how they address the pain points of manual processes efficiently.
The pain points of manual payouts
To put the advantages of automated vendor payouts into better perspective, it is important to understand the shortcomings and challenges that manual payouts pose to your business.
1. Errors
Manual work, by nature, is more likely to show computational or other errors during invoice processing as compared to using automated solutions. At smaller scales, errors are manageable internally. However, as a business scales up, it may become extremely complicated to process invoices that have been identified for errors.
This may also lead to payment delays, strained vendor relationships, and potential financial discrepancies. Even a minor mistake in manual payout processes, such as data entry errors or miscalculations, can have cascading effects, impacting the overall accuracy and efficiency of financial transactions.
2. Time-consuming
Manual work isn’t quick (comparing it with the speed that modernized automated solutions can provide.) As such, processing every single invoice through a professional’s desk may delay the queued invoices by a few more days.
Additionally, the approval process requires careful examination of invoice attributes and conformance to specifications. Manual processing can take longer.
3. Overload
If your business partners with multiple vendors and receives supplies multiple times a month, the entire manual processing system could become extremely complicated and get out of hand.
Your existing teams could face work overload from having to deal with increasing volumes of vendor payouts with no technological assistance, leading to more frequent errors.
4. Impact on cash flow and business repuration
Delays and errors in the manual payout process directly impact cash flow. Late disbursements and inaccuracies in financial transactions can create disruptions, hindering the smooth flow of funds within the organization.
Additionally, prolonged processing times and the potential for errors can tarnish your business reputation. Vendors, crucial partners in your supply chain, may become dissatisfied due to delayed payments or inaccuracies, leading to strained relationships and a negative perception of your business.
Advantages of automated vendor payments
Automated vendor payment solutions consolidate all invoice-related operations into a single interface. This not only helps streamline the tasking but also aids the workforce in speeding up the whole process of invoicing, right from data entry through approval and payment disbursal.
Below are some key advantages that come with implementing automated vendor payment solutions:
1. Cost savings
The primary advantage of adopting automated vendor payment solutions manifests in substantial cost savings, both directly and indirectly.
The direct cost savings occur from preventing delays in vendor payouts, which, for some contracts, may incur a standing penalty for the delay of every single day in releasing payments. On the other hand,
The indirect savings are equally impactful. Automated systems contribute to the reduction of operational costs associated with manual errors. Streamlining payment processes and eliminating inaccuracies not only enhances operational efficiency but also prevents additional expenses related to error rectification.
This dual approach fosters a more cost-effective and efficient financial ecosystem, positioning businesses for sustained financial health and heightened credibility.
2. Reduced errors
With the availability of multiple payment options like EMIs, BNPL, cards, net banking, cashbacks, etc., the entire reconciliation process has become extremely complex. Using automated vendor payout solutions, it becomes possible to automatically keep track of every single payment occurring on every channel.
These systems are capable of collating the payment data of various vendors from different channels into a single profile. It gives you a consolidated view of the payment status of each vendor, regardless of the payment method or channel used.
Additionally, automated systems prevent the risks of missed payments, duplicate payments, incorrect calculations or payments, etc.
3. Faster processing of payments
Automated vendor payouts leverage the power of AI to augment workflows and take the workforce off tasks that are repetitive, clerical, and time-consuming. As such, the speed of tasking is drastically enhanced.
Automation is particularly helpful for tasks such as invoice data validation, entry matching, specification checks, reconciliation, data entry, etc. These tasks require no critical thinking but still need a lot of time to be completed.
Automation tools can finish tasks of this nature within a matter of seconds, saving the entire team a lot of time and effort. This not only enhances efficiency but also accelerates the processing of payments.
4. Improved cashflow
The biggest benefit of automating vendor payments is the improvement in cash flow numbers. Cash flow represents the movement of money within and across a business, which means that any inefficiencies in payments or accumulated penalties will show up in the cash flow statements. These could negatively impact the year-end financial assessment of your organization.
Automated vendor payout solutions help accelerate the mundane invoicing processes, leaving only the flagged entries or approvals for the humans to check before proceeding. In fact, if you define the approval rules and protocol for the automation algorithms, even this process can be automated reliably.
Quick and accurate processing results in timely vendor payouts, improving the quality of cash flow statements for your business.
Conclusion: Why Choose Automated Vendor Payouts?
Automated vendor payments aren’t just a matter of convenience in today’s fast-paced B2B ecosystems; they are a necessity.
Consider this: the average cost of processing a single payment amounts to $8, with a substantial 62% attributed to labor costs. As the volume of vendor payments escalates, this figure exponentially multiplies, magnifying expenses for each member of the workforce and every transaction executed.
Now is the time to streamline the payment process through automated vendor payment solutions like the Plural Affordability Suite. It is a checkout interface that allows businesses to organize their payment processes based on attributes like payment method, discounts availed, the amount paid in full or in part, and much more.
To explore the full functionality of the Affordability Suite, write to us at pgsupport@pinelabs.com or click below to get started today!
Plural by Pine Labs has received an in-principle authorization from the Reserve Bank of India (RBI) to operate as a payment aggregator.
