The automated vendor payment system is rapidly gaining popularity in India. Enterprises are gradually moving away from the age-old manual approach for payment processing to an automated payment system. An automated payment system is a tool businesses use to automate their payment process to vendors. The process would encompass activities right from invoice scanning, seeking approval to processing the same and releasing the payment. Such automation helps businesses quicken the process of vendor settlement and mitigate the risk of human error.
While automation of the payment process has a range of benefits, let us look at some key benefits enterprises can derive:
(1) Quicker payment processing
Manual processing of invoices for payment and approval takes longer. An enterprise adopting an automated payment system is sure to settle vendors much more quickly when compared to those which still stick on to the age-old manual vendor invoice processing. The automated system improves the efficiency of the process by reducing the invoice processing cycle. Further, quicker settlement to vendors could also benefit the enterprise by getting early payment discounts, which can in turn aid them in optimising their working capital requirements and cash flows.
(2) Mitigating risk of fraud
Most businesses run the risk of fraud on account of a decentralised accounts payable processing system. If invoices are settled by different employees or from different office locations, the possibility of fake invoices travelling through or duplicate invoices getting settled is high. Resultantly, such decentralised processing limits visibility into the payables function altogether which in turn gives rise to both internal and external frauds.
Automated accounts payable process comes to the rescue of businesses as it requires all invoices to travel through only a single online process. This gives the process owners visibility into every payment being made, identify suspicious payment and carry out requisite checks before any fraudulent payments are released
(3) Mitigating risk of human errors
Manual payment processing to vendors is susceptible to errors, such as errors in duplicate payments, missed vendor invoices, etc. Errors of this nature creeping into the payment process cycle could wreak havoc and disrupt the entire process of payment, in turn resulting in loss of valuable time to the enterprise apart from damaging relationships with suppliers and vendors. An automated payment system drastically reduces manual work, thereby reducing the risk of human errors too.
(4) Better vendor satisfaction
Automating payment processing reduces payment cycles. Resultantly, vendors or suppliers have their receipts processed quickly, thereby bringing down their day’s sales outstanding. Besides, the payables team spends a lot of time on updating suppliers on the status of their payments. Payment automation helps provide suppliers with real-time visibility into the status of their payments via a portal. This, in turn, leads to high vendor satisfaction and improves the relationship with the supplier base.
(5) Better visibility
An automated payment system undoubtedly allows monitoring financial data, performing advanced analytics, and improving processes. These days, payments are becoming a significant area of focus to enable the finance team of an enterprise to study their cash flow. Such visibility paves the way for adopting strategic tools to better the cash position of an enterprise viz like supply chain financing and dynamic discounting, etc.