Vendor payment automation through Karbon Payout

Vendor Payment Automation – Top 5 reasons why your business needs it

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 coworking space to food providers. Especially if your business entails retail of products supplied by your vendors, chances are your business already makes vendor payments on a regular basis.

Either way, there’s a fair chance that you have a system in place that tracks all vendor payments invoices to find out when they’re due. 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 can move on to understand how vendor payment automation can save you time and money both, lets understand vendor payments first.

What are vendor payments?

Vendor payments are also known as accounts payable or invoice 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 and in an optimized fashion can ensure that your vendors get paid on time without fail. This in turn can establish a great relationship between you and your vendors. 

Challenges

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 on a daily basis if you’re looking to expand your operation and grow your business. This means that you cannot spend all your effort and energy into making payments. You need a system that handles this for you. You need vendor payment automation.

How to make these payments?

A regular, well-thought operation would look something like this – 

vendor payment automation is simplified through Karbon
  1. Invoice is received from the vendor(s)
  2. Invoice Verification
  3. Spreadsheet filling – invoice details
  4. TDS calculation & deduction
  5. Payment due date tracking
  6. Using bank portal to make payment
  7. Spreadsheet filling after payment
  8. Aggregation & TDS payment

We spoke to several businesses about their pain points of handling vendor payments on a daily basis. 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. These solutions are not built for these type of businesses. Most of the businesses – 

  1. Rely on spreadsheets to keep track of all vendor invoices
  2. Manual TDS calculation and payment
  3. Using bank portal to make payment manually and then reconciling manually as well.
  4. Using the government portal to make TDS payment.
vendor payment automation solves these pain points

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.

You might argue that it is a sustainable process because its all electronic. Here is the counter – 

Manual Challenges that are solved by vendor payment automation

vendor payment automation solves these pain points

Manual process of data entry

When you have many invoices coming in from different vendors, it is very easy for your data entry specialist to make errors. This is the most probable issue that comes along with a manual intensive payment process.

Updating a spreadsheet manually is the most prone to mistakes. Even worse, you could even forget to add an invoice details to the spreadsheet. A single mistake costs a lot and has far-reaching consequences for your business.

Tax Compliance

This by far is the biggest pain point associated with making vendor payments. You need to deduct TDS from your end associated with all the vendor invoices that you process. What follows this is going to the respective portal and paying the taxes.

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. Many times, an accountant is hired to do this job. This further increases the chances of invoices getting handled improperly, calculations going wrong and ultimately payments getting delayed.

Slow payment processing

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.

Do not forget to take into account the fact that an error while transacting can be costly for your business in two ways – a) quite literally – if transferred to the wrong account, banks levy a heavy reversal fee and b) your vendor relationships get hurt as soon as we talk about delayed payments.

Spreadsheets increase complexity

If you want to truly grow your business, it also means there will be a growing number of transactions that follow. It also means availing services or products from more vendors. Keeping all records on a spreadsheet will not work in this scenario. Lets remember that spreadsheets were created to easily analyze data – not store it.

Concerns over security

Lets face it – a spreadsheet isn’t the most secure option for you to be storing sensitive data like transactions and accounts payables. Even though there’s ways to protect the spreadsheets, there are ways around it. This makes it very difficult for the business to prevent fraud. It is better that you don’t land in a situation where you have to rectify damages caused by fraud.

How does Karbon solve all these problems?

We understand cash flow. Karbon Payout is built to serve as an effective vendor payment automation tool that optimizes your time and saves a lot of cost for your business. Sit back and let our Karbon Payout handle your financial operations.

Why do our customers love doing business with us?

  1. Single dashboard for all payments – all vendor processes are consolidated within one user friendly dashboard to help you keep your financial operations in order.
  2. Smart platform replaces any and all kind of spreadsheets that you use to track vendor payment status.
  3. Never miss another payment with Payout. All the due dates are stored in one place so you can see and prioritize your vendor payments.
  4. 24×7 instant payments – banks might sleep, we never do.
  5. Payout links – manual vendor beneficiary addition? Forget about it! Send payout links to your vendor and let them add their beneficiary details there. It gets instantly synced to your account and takes away a huge part of your operational liabilities.

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Written By

Nikitha Reddy
Growth VP @ Karbon


FAQ

How does payout work as a vendor vendor payment automation tool?
Payout links – Complete Guide
Access Queries – Member – Payout
How to use Karbon Card to make vendor payment?

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