Every business leverages vendor services in one form or another – to acquire raw materials, tools, services, software, etc. This is especially true for businesses with retail operations that depend on their vendor partners to keep the supply chain stable. This creates a regular stream of vendor payments that must go out from the business to the vendors from time to time.
Since vendor payments regularly consume a large bandwidth for several businesses, streamlining this process can help create better efficiencies and workflows overall. In fact, 90% of IT users have confirmed that automation has helped them to make decisions faster and mitigate the chances of errors.
Vendor payment automation can prove to be a pivotal step in streamlining the supply chain payments for such businesses.
Key challenges of vendor payments
Even though vendor payments are straightforward, there are several challenges that businesses face during execution:
1. Invoice challenges
Invoicing can be a complex process, especially when each vendor has its own format and accounting cycle. This can create a flood of confusing invoices, disappeared or missing invoices (unprocessed), double payment issues, etc. A robust management system is required that can help businesses stay on top of invoicing.
2. Operational challenges
Operational challenges, such as slow processing times, manual data entry requirements, matching errors, delayed mailing, etc., can drastically slow down the process. However, all these challenges can be mitigated using automation tools that help speed up processing and communications.
3. Management challenges
A healthy supply chain banks on healthy relationships between the business and its vendors. It can be difficult sometimes to manage all the vendors properly to keep all the payments on time. Some unauthorized purchases may also strain relationships, leading to a compromise in the supply chain.
4. Security and compliance challenges
With more and more operations going digital, there is the challenge of security and compliance with regulations. The business needs to consider risks of fraud, security compromise, personal data use, payment errors, etc., to maintain a healthy supplier payment system.
5 compelling reasons to automate vendor payments
Vendor payments are not complicated, but they are comprised of a lot of moving parts such as payment terms, taxation, remittances, etc. Keeping track of all this work manually can take more manpower and effort than necessary. It is here that vendor payment automation can truly be a compelling solution in five key ways:
1. Elimination of manual processes
There are a lot of manual processes traditionally involved in vendor payments, such as invoice verification, spreadsheet filling, TDS calculation, and deduction, tracking due dates for payments, and much more. Handling all these processes manually can create a lot of workload for the manpower employed at your business.
With vendor payment automation, all this manual entry work can be delegated to automated, AI-powered systems that make a quick job of it. It helps to reduce manual errors during tasks such as data entry and also reduces the time of processing. Furthermore, it helps free up your personnel for critical tasks.
2. Tax and compliance tracking
One of the most complicated tasks in vendor payments is to calculate taxation and deductions for every vendor separately. Taxes differ from commodity to commodity and are also different for the type of vendor you are engaging with. It can, therefore, become overwhelming to calculate accurate tax liabilities every time for every single invoice.
Furthermore, businesses are required to calculate tax liabilities at the end of each month and file the returns, which may become time-consuming in the long run. Automating vendor payments for tax calculations and compliances can thus remove this hurdle to achieving higher processing efficiency.
3. Payment processing speeds
Payments made through traditional banking channels take up to seven business days to complete fully and update the systems. In the fast-paced world of today, seven days is a bit too long. Slow payment processing can create hurdles in doing business smoothly with your vendors.
Keeping in mind that your suppliers also require working capital to keep the goods flowing, it is important to achieve high speeds when processing payments. Using tools that automate vendor payments, it is possible to speed up invoice processing and other backend processes to facilitate quicker payouts to the vendors.
Additionally, integrating a payments solution with vendor payment automation can help set up services like payment reminders and automation of recurring payments.
4. Handling complexities
As your business expands, it will require varied services from an increased number of vendors. This would inevitably increase the complexity of manual spreadsheets that contain the details of invoicing. Its manual recordkeeping will begin to demand more resources and manpower as it grows, needing to be tallied consistently to keep it updated.
All of this work can be eliminated by using a vendor payment automation solution that can automatically extract data from digital invoices for the purpose of recordkeeping. It may also provide you with the provision to analyze the data, making it even simpler to extract insights.
5. Security concerns
If your vendor payment data is sensitive, it is not advisable to use spreadsheets for storage. The security and compliance arrangements in spreadsheets are minimal and may lead to breaches if not handled properly.
Automating vendor payments gives you access to the right tools and security encryptions that keep your data safe. These tools have inbuilt compliance trackers that ensure all tax and security compliances are met and updated at all times.
The takeaway
When it comes to vendor payments, it is the speed, accuracy and efficiency of the processes that make all the difference. For this reason, vendor payment automation can drastically improve vendor relationships and timeliness in supply chain operations.
With solutions like Plural by Pine Labs, you can set up smooth payment channels that are secure, safe, and fast. Plural’s full-fledged digital payment infrastructure also helps you consolidate all sorts of payment services onto a single platform, which includes discounts, rewards, and much more.
Contact us to see how we can complement your vendor payment automation solutions with our reliable payment infrastructure.
