Vendor payment Challenges

By Annapoorna


Updated on: Dec 19th, 2021


4 min read

social iconssocial iconssocial iconssocial icons

Vendor payments are commonly referred to as accounts payables. They represent the payments due to the business’s suppliers of goods and services. More often than not, purchases are made on a credit basis, payable after a specified period.

Common challenges in vendor payments

The accounts payable function needs to be a smooth and free-flowing process. If not, problems such as the following may arise:

  • Manual data entry

Manual data entry always carries a high potential for errors. Errors of miscalculation and payment-related errors are common and inevitable, especially when multiple vendors have a large number of invoices. Since the data is entered on a spreadsheet, mishaps are common.  

  • Management of vendor invoices

Handling a large volume of vendor invoices often results in problems with regard to tracking the invoices and their due dates. It may all seem a little too overwhelming, especially when you miss some of the due dates. This results in the levy of interest charges or penalties for late payment that could have been avoided. Moreover, poor management of vendor invoices tends to affect vendor relationships.

  • Missing purchase orders

Where purchase orders are created manually, businesses often find them time-consuming and thus do away with them. This makes it hard to track the items ordered. Moreover, it leads to price fluctuations in the purchase price, especially.

  • Compliances

The business must ensure that TDS is deducted for all invoices to be paid. Once the TDS is deducted, the TDS return has to be filed, and TDS payment has to be made on the designated portal. Often, with the error-prone manual system, the business runs the risk of incorrect TDS rates being chosen and incorrect amounts of TDS being paid as a result.  

  • Slow and inefficient processing

Manual systems drastically slow down the payment process, especially in an organisation where 3-5 staff members are authorised to approve a particular payment. This causes significant delays in the payment process, thus leading to fines and charges levying for delayed payments.

  • Lack of security for spreadsheets

Records can be maintained on a spreadsheet efficiently only when the number of invoices and vendors is relatively small. It is not feasible for an organisation that has a large number of invoices and vendors. Moreover, although the spreadsheets contain sensitive information, the security controls are very poor. It is easy to manipulate and make unauthorised changes to the stored data.

Solutions to common challenges in vendor payments

Every process contains flaws from time to time, but it is encouraging to note that every problem has a solution. Here are a few of them:-

  • Process automation

Automation of the vendor payments process enhances the payment process’s accuracy, timeliness, and efficiency. Tracking and following up on the due dates becomes relatively easy, with reminders being common in modern accounting software and digital invoicing.

  • Vendor management

Choosing the right vendors that suit your business does make a remarkable difference to the process. Regular reviews of the service level agreements and contracts with the vendors need to be carried out to ensure that the terms are adhered to.

  • Design a streamlined process

The process should be smooth, from the issue of a purchase order to the completion of the payment. Modern accounting software facilitates process automation, thus speeding up the entire process while maintaining accuracy and efficiency.

  • Backup the digital records

Software today allows for data to be stored on the cloud. This ensures that the data is safe and secure, with regular backups being performed. This helps in satisfying the legal compliance requirements with regard to the period for maintenance and storage of business records.

  • Review the invoices before payment

It is always good practice to verify all the items against the purchase order and then the invoice to ensure complete delivery. Once this is done, the vendor can make the payment without any hassles or issues whatsoever.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more


Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use


ISO 27001

Data Center


SSL Certified Site

128-bit encryption