Accounts Payable Outsourcing in Bengaluru, Karnataka

Managing relationships with the vendors and suppliers is a challenging task for a company operating in Bengaluru, Karnataka. More the vendors, the more the probability of errors in the accounts payable process of the company. An inefficient accounts payable outsourcing process can lead to complications for a growing business and can even turn out to be a bottleneck in the growth of the business in Bengaluru, Karnataka.

Most businesses in Bengaluru, Karnataka still use paper invoicing to manage their accounts payable processes. The transformation from paper accounting systems to digital systems is both costly and time-consuming. Outsourcing accounts payable in Bengaluru, Karnataka can not only streamline and bring efficiency to the business but also can help in gaining an edge in the industry.

What is Accounts Payable?

Accounts payable refers to liabilities that a business has against the purchasing of the products and services. Instead of making upfront payments, companies purchase goods and services on credit, which is recorded as accounts payable in accounting.

Only running and short-term debts are referred to as accounts payable. Long-term debts like working capital financing, are not considered as accounts payable. It is a liability account, in which the total balance of the credit should be equal to the total outstanding liability of the vendors’ invoices that the company has received.

What is Accounts Payable Outsourcing in Bengaluru, Karnataka?

In accounts payable outsourcing in Bengaluru, Karnataka, a third-party team manages the accounts payable processes in Bengaluru, Karnataka that can include sending purchase orders administration of accounts payable and discrepancy resolution if any. Accounts payable outsourcing helps to free up the resources to focus on core business processes.

Third-party team provides the skills, tools, and technology and integrates new capabilities to streamline accounts payable functions. The accounts payable outsourcing services in Bengaluru, Karnataka offer an advantage to the businesses that to completely redo their existing and outdated accounts payable processes.

Karnataka has successfully been able to establish itself as a nucleus of the Knowledge, innovation and research in the Asian region, with more than 400 super technologically equipped R&D centres functioning here perfectly. It is the largest exporter of software in India, which makes it the principal in the technological sector in the country. This became the first ever state to roll out its Aerospace policy as a result now aircrafts and space craft ventures based here contribute about 65% of aerospace linked exports from Indian region. It could develop Hi-tech Defence and Aerospace Park in a sprawling area of 1,214 ha equipped with superior infrastructure adjacent to Kempagowda International Airport, Bengaluru which includes 102 ha area of Aerospace SEZ. Country’s first private Aerospace SEZ of 121 ha area which is developed and established by the headquarter office of Aequs Global at Karnataka.

The state is well looped with all the central markets of the world with the help of 2 international airports. 300 km of coastline stretched on the eastern part of the state along with a major port at Mangaluru provides exposure to the sea route as well. It is privileged to come under Chennai-Bengaluru Industrial Corridor and Bengaluru-Mumbai Economic Corridor and gain all the supplementary benefits of the crossover. With strong infrastructural base of Pavagada Solar Park which is the largest in the country with an installed capacity of 2000 MW, however till now only 1400 MW is operational, i.e. still there is a scope for further expansion.

In totality Karnataka is a most enduring destination for investments for a variety of sectors like heavy machinery, auto-electronics, textile industries and food processing industries. Coffee is the state product and makes it the largest producer of coffee in India. Karnataka is the fourth largest contributor in the national export basket amounting to around $17.4 bn in 2018-19 i.e. approximately 5.3% of the total export corpus of the country. The exorbitant privileges of the state and steep growth in each and every sector brought inflow of $40.7 bn FDI during 2000 to 2019 which makes it the third highest.

Investment opportunities in Karnataka value nearly $719.97 bn, comprising of 936 projects out of which 22 are private and 914 are owned by the Government, with 177 promoters involved, spread across 31 districts which makes Karnataka a lucrative choice among investors in the commercial, technological and industrial segments.

Benefits of Accounts Payable Outsourcing in Bengaluru, Karnataka

Accounts payable outsourcing in Bengaluru, Karnataka has immense benefits. Hiring services of a third party does not refer to just transferring of basic tasks, such as data entry but it results in a dramatic increase in the efficiency of the accounts payable process. Let’s discuss various benefits that account payable outsourcing brings to the company:

Profitability

Efficient management of accounts payable in Bengaluru, Karnataka leaves a positive impact on the profitability of the business. Timely payment of the bills by the company builds a strong relationship of trust between the company and its suppliers. Once the trust is established trust, the suppliers are willing to offer better rates, discounts, and a longer period of credit that positively impact the profitability.

Efficient Bookkeeping

Using an efficient account payable process provides a clear view of the liabilities that you have to pay so that you can send out the payments on time. It ensures that you don’t end up paying for an invoice twice accidentally. The process also allows you to set up a system to pay for an invoice early which could help your business qualify for possible discounts.

Saves Time and Money

Companies in Bengaluru, Karnataka have to hire and train the staff to manage the accounts payable process. Outsourcing Accounts Payable in Bengaluru, Karnataka helps in avoiding these overhead expenses since the bookkeeping staff don’t have to spend hours on manual data entry, and recording disbursements. Moreover, as the organization grows you have to hire more teams while outsourcing brings automation and incremental costs are not exponential with the growth of the business.

Security

Manual accounts payable processes use paper invoices, receipts, and checks that have the risk of payment fraud and non-compliance from the vendors. As a business, you may be procuring goods and services from multiple vendors and contractors across the geography. Handling the timely and correct payment to the increasing supply chain becomes complicated.

The majority of MSMEs don’t have the resources and ability to hire competent staff which keeps track of payment frauds. In addition, they don’t have the skills and security tools to do an audit to avoid fraud. The easiest solution is to rely on accounts payable outsourcing services.

Efficiency

Conducting account payable processes is prone to errors and mistakes that you would discover during an audit. These mistakes could create government complicity issues and result in penalties and fines from the regulators. Accounts payable outsourcing services in Bengaluru, Karnataka use advanced technology and invoice processing automation, which are very less likely to suffer from costly human errors.

Constant Coverage

In-house accounting and bookkeeping teams have a financial supervisor, to manage issues however, a single supervisor cannot take care of all the work if employees are absent. The outsourcing accounts payable process in Bengaluru, Karnataka takes away this workload off and the stress of covering up does not land on a sole supervisor. As most outsourcing service providers have multiple employees for conducting similar tasks, the company doesn’t have to worry about in-house under-staffing.

Process for Outsourced Accounts Payable Accounting in Bengaluru, Karnataka

The Manual Accounts Payable process follows these steps

Step 1 : Receive the Invoice from the supplier or vendor or any other service provider

Step 2 : Invoice gets assigned internally within the team or outsourcing agency for processing of payment and related accounting

Step 3: Invoice data entered into the accounting software in the right head of accounting. This process also involves the verification of payment due as per contract signed in terms of price negotiated, quantity and quality of material delivered along with payment terms.

Step 4 : The Invoice value and entry is checked thoroughly before the approval for payment to vendor or supplier.

Step 5: Invoice processed for payment in the coming payment run or cycle after deduction of necessary TDS or levies as/if required by law or other regulatory agencies

Checkpoints for Audit of Accounts Payable Outsourcing process in Bengaluru, Karnataka

It is a review process for improvement of accounting procedure of the company that also helps in strengthening risk management plans. As an independent function, Internal Audit takes care of the overall governance of the company. Moreover the analysis and assessment of accounting data and accounting processes, provides relevant insights to the Senior Management and other governing bodies.

The process of Internal Audit of Accounts payable helps in redrafting the policies and rectifying process flows to minimize errors and improve overall data accuracy of the system.

The Internal Audit for Account Payable Outsourcing can be planned based on following parameters

1. Audit plan, Observations & key findings of previous year(s).
2. Key business vectors or accounting processes
3. Specific requirement(s) for the purpose of which internal Audits was thought for.
4. Any key findings during risk assessment of accounting procedure
5. Management discretion

Internal Audit of Accounts Payable – Risks associated with payment processing for invoices and Contracts

• Unauthorised/fraudulent purchase/payments.
• Duplicate Payments to vendors
• Late processing of payments or inefficient process resulting in late fees and loss of goodwill
• Lack of clarity on assignment of duties within the officers requisitioning, receiving goods, ordering, authorizing payments.
• Incorrect payments accounting impacting customers’ ability to prepare statutory accounts.

Best Practices for Audit of Outsourced Accounts Payable in Bengaluru, Karnataka

• Well defined and documented Policies and standards for operation procedures for initiating, review and approval of all accounts payable expenditures
• Clearly defined roles and responsibilities specifying duties and approval of ordering and payment within authorization limits.
• Time and date stamping of invoices specifying actual time of receipt
• Control over creation and modification of creditor master-file data, specifically bank account details (quite helpful in detecting frauds or malpractices)
• Periodic review of debit balances and necessary action accordingly
• Authorization of Payments as per approval matrix after due checking of invoice presented for payment. Also timely intimation to vendor, if required correction for resubmission.
• Custody of cheques and other negotiable instruments in a secured and controlled manner.
• Timely reconciliations of account payable and follow up of queries thereon.
• Proper recording of expenses and with approval within budget specified.
• Control of electronic payment systems while inward or outward of payments.
• Robust mechanisms to ensure absolute zero case of duplicate payments.
• Checking of invoices against the due amount as per contracted prices and schedule.
• Control on credit notes and actions thereon.
• Availability of system generated reports of review of numbers and statistics like average credit period and processing time for payment to supplier.

Conclusion

If your company is looking forward to increasing productivity, maximize results, and reduce the risks of frauds and errors, you must consider accounts payable outsourcing in Bengaluru, Karnataka. With a competent service provider, your company will be able to reap all of the benefits that account payable outsourcing in Bengaluru, Karnataka has to offer.