Every business depends on the supply of goods or services or both. Some companies like consulting agencies may need only office supplies and other essentials to provide a good work environment. However, manufacturing units need raw materials to process further and sell under their brand’s canopy.
A construction company will need cement, gravel, wood, iron, steel, and other necessary supplies for building homes and offices. The vendors who supply the raw material are selected after due deliberation and review of their demonstrated credibility. Organizations that use AP automation software are prompt with their payments as the entire process is streamlined and any errors in the invoices are rectified before the dues are scheduled for clearance.
Bank mergers usually create hassles in the verification of vendor payments. There are discrepancies between the information they provided and the updated details, which have resulted in failed payments and disappointments. The AP software takes into account the banking information code of the majority of the banks operating both locally and internationally.
Any mismatch of information is immediately alerted and automated emails, recorded voice calls, and a short message is sent to the vendor so that they can correct their details. Here are a few ways AP automation aids business processes:
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First Time Resolutions
When a process is streamlined to tick all the boxes in the checklist in the first instance the result is quality output free of errors with a faster turnaround. The software detects duplicate invoices and eliminates the copies. Fraudulent practices of submitting multiple invoices are flagged and additional payments without authorization are restricted. Incorrect pricing or quantity is cross-checked with initial contracts, delivery challans, inventory ledger, and gate passes.
All the details pertaining to compliance and tax calculation are computed before the payment is processed. Any amount that has to be collected at the source and paid to the authorities is done with the help of managed accounts payable. Vendor information such as their name, address, and bank information are cross-checked before processing payment.
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Reduced Costs
When the payments are regular, it is possible to negotiate the terms and ask for fairer quotations that will impact the margins favorably. Often vendors do not like to lose their loyal customer base over a bonus or a discount that can be passed on to them. Overall these little acts pool up to create substantial wealth for the business.
With AP software late payment penalties are averted and maintain the goodwill of the brand. Credit rating agencies favor businesses that stick to their commitments and improve their ranking. Therefore getting business loans at cheaper interest rates is possible and can be used whenever there is a need for expansion funds.
Conclusion:
Vendors are important stakeholders who can decide when to tighten the noose in the supply chain. If the terms and relationship are cordial, then in a genuine crisis, vendors go out of their way to help their regular clients. Sitting on cash and not paying vendors on priority should be avoided and best practices like adhering to a good AP automation platform need incorporation for a good standing of the company.
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