Vendor payments are made when a business pays the suppliers or vendors to buy goods, services, or both. This is done by setting up a system that works for a business. Vendors supply products, services or even solutions to businesses. The vendors send invoices to the business once the businesses receive their goods or services. Vendor payments refer to the process of paying suppliers from where the business or a company receives goods and services.
Vendor payment, when done in a systematic and timely manner, enhances the business relationship with the suppliers. While making a vendor payment, it is imperative to ensure that you do not have overdue for an extended period. This helps your company’s smooth functioning and maintains a healthy relationship with your vendors. This requires a vendor payment portal and is essential for any organization because almost every business requires vendor payment services.
The process of vendor payment
In big organizations, vendor payments are conducted on a massive scale by a larger group of staff, whereas in medium-sized businesses, only a few individuals manage this process. Therefore, to ensure the smooth working of an organization, there is a particular process regarding vendor payments that you must understand and follow.
Step 1: Collect the invoice from the supplier or vendor (if the vendor still needs to send it).
Step 2: Always verify the completeness and accuracy of the invoice sent by the vendor. In addition, do make sure to check that the department that has made the purchase has received the goods and has signed them off.
Step 3: Account for the invoice on the accounting system or the ERP by making the required general entry. Also, account for taxes like TDS occurring under tax law and any input tax credit (ITC) under GST.
Step 4: Submit the TDS to the government within the due dates defined by the ITR. Also, apply reconciliation of GSTR-2A and GSTR-2B with the purchase registered regularly. Finally, check with vendors to see if they have uploaded the invoices on which you can claim ITC.
Step 5: Before the invoice due date, the approval of the authorized signatory of your business concern is essential. This is required to initiate or make the invoice payment.
Step 6: Pay the vendor, calculate the net of the TDS subtracted, and record it in the books of the ledger with the help of a payment voucher. Then, pay using the mode decided between you and the vendor. This can be UPI, bank transfer, e-wallets, eCommerce, cash, or mobile payments. Finally, collect the receipt from the vendor and record it in the books of account on the successful payments.
Vendor payment in the digital era & its benefits
Apart from the manual process of vendor payments, there is also a cloud-based vendor payment process that is quite different and has its benefits. The vendor payment process varies between several payment service providers (PSP). Many businesses perform vendor payments, and many use spreadsheets to calculate TDS. As we go through digital transformation, more importance is laid on an innovative, technological-based solution in this dynamic era. Here are the benefits that come along with it:
- Enhances approval timelines by automating it
- To ensure that data is audit-ready, it keeps a digital trial
- Bill payments are simplified and there is reduced manual intervention
- More effortless cash flow in the organization
- Allows the organization to keep track of its financial flows with ease
The company must understand its workflow, advantages, and disadvantages to amplify these benefits. This involves checking the existing vendor payment process and gaps or suggesting ways to resolve these. Also, the time and cost involved in processing vendor payments must be kept in mind. Thus, a business owner needs to know how digital payments can benefit the business, the risks involved, and how to secure smooth payments before making any decision.
A vendor payment process requires accountants to add, track, make vendor payments, and automate TDS payments. As a result, businesses have shifted from paper-based invoicing to end-to-end automation of the vendor payment procedure.
Why is vendor payment necessary?
Managing vendor payments in a structured and timely manner provides a smooth relationship with your suppliers. In addition, it ensures a healthy relationship between the supplier or vendor, and the person at the receiving end. Furthermore, timely vendor payments also ensure continued supply of goods or services that helps you keep your business running. You need a vendor payment portal in case your company engages in the following transactions:
- Payment to vendors in multiple currencies
- Coordinating with many merchants
- Your organization changes the timeline of credit periods
- Multiple branches and divisions from which payments are made
- When it is necessary to make timely payments for acting under the MSME Act and GST requirements
We have seen a shift in business enterprises from the manual to the digital era. In this dynamic environment, digital-based payments are preferred by businesses for the smooth functioning of the company. Moreover, to ensure everything is done systematically, organizations have adopted this technique of vendor payments, which further helps maintain a healthy relationship with the business firms and vendors. This ensures trust, transparency, and a strong relationship between the two.
You can automate payments to multiple vendors with EnKash, as it helps with easily accessible payment modes with a single click for bulk pay-outs and ensures complete visibility. EnKash allows direct, single-click payments. You can pay multiple vendors or make multiple payments with real-time automated entries. In addition, streamlined approvals are available in fractions of seconds for predefined limits. The best part of EnKash is that it supports all online payment methods. So, when it comes to easy and fuss-free vendor payments, always trust EnKash with their fintech solutions