Managing relationships with the vendors and suppliers is a challenging task for a company operating in Indore, Madhya Pradesh. 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 Indore, Madhya Pradesh.
Most businesses in Indore, Madhya Pradesh 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 Indore, Madhya Pradesh 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 Indore, Madhya Pradesh?
In accounts payable outsourcing in Indore, Madhya Pradesh, a third-party team manages the accounts payable processes in Indore, Madhya Pradesh 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services in Indore, Madhya Pradesh offer an advantage to the businesses that to completely redo their existing and outdated accounts payable processes.
Situated in the central part of the country, it is widely known as “Heart of India”. This region is connected with vigorous rail network with 550 trains passing across the state daily and a thick network of roads of over 5,000 Km, 5 commercial airports with more than 100 flights operating every day and 6 Inland Container Depots (ICD’s). Thus, it becomes a foremost beneficiary of mega infrastructural projects under both North-East and South-West corridors crossing the region.
Madhya Pradesh is the top-most player among states involved in food processing and agri-based industries. It holds No.1 rank among regions yielding oranges, pulses, oil seeds, aromatic and medicinal plants, soybean and gram. And bags the second position in terms of production of green peas, mustard, grains, tomato, onion, green chilli, sesame and guava. Furthermore, this state has the second highest floriculture produce. A paradise for such industries, it is a home to 8 Food Parks, 2 Mega Food Parks, 45 Industrial areas for the sector and 5 Agri-export Zones. This state is a leading producer of horticulture crops as well as and provides rewarding prospects for the food processing projects.0020
This state is the only region producing Diamonds in the country. Also, this region has a strong foundation in mineral resources and contributes 14% of the cement production of the country. Oil refinery at Bina has an annual capacity of 6 MMT. These developments in varied sectors are backed by the installed power generating capacity of 23,400 MW, out of which 35% is sourced by renewable energy sources.
NATRAX – Asia’s largest auto testing track is located at Pithampur, Indore, which is spread across 2,000 hectares. Pithampur is a hub of auto clusters with more than 120 units and 450 small to medium units operational. Budni is known for Central Farm Machinery Training and Testing Institute. The government has established institutes for skill development like MSME Technology Centre at Bhopal, Symbiosis Skill University at Indore and Indo-German Tool Room at Indore.
With 20% rate of urbanisation across the state, there are 931 females per 1000 males. 63% of the total population of the region falls between the age group of 15-59 years and is the 5th most populous state of the country, with 73 million people residing i.e. nearly 6% of the country’s population. This state has 2 Central University, 21 State Universities, 27 Private Universities, 298 Engineering Colleges (AICTE approved), 211 Management Institutes, 1155 Industrial Training Institutes, 69 Polytechnic Institutes and 13 Medical Colleges.
The aggregate value of investment opportunities in Madhya Pradesh is nearly $731 bn, comprising of a total of 1342 projects out of which 11 are private and 1331 are Government owned projects, with 214 promoters involved, spread across 56 districts of the state, which makes Madhya Pradesh a paradise for developmental projects in the commercial segment. Prestigious Government schemes are also running here like Pradhan Mantri Awaas Yojana Gramin which values about $59.38 bn, Pradhan Mantri gram Sadak Yojana Project costs a whooping amount of $50.24 bn, Wind Power Project worth $56.47 bn and Solar Power Project with aggregate value of $63.57 bn.
Benefits of Accounts Payable Outsourcing in Indore, Madhya Pradesh
Accounts payable outsourcing in Indore, Madhya Pradesh 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 Indore, Madhya Pradesh 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 Indore, Madhya Pradesh have to hire and train the staff to manage the accounts payable process. Outsourcing Accounts Payable in Indore, Madhya Pradesh 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 Indore, Madhya Pradesh 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 Indore, Madhya Pradesh 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 Indore, Madhya Pradesh
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 Indore, Madhya Pradesh
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
- Audit plan, Observations & key findings of previous year(s).
- Key business vectors or accounting processes
- Specific requirement(s) for the purpose of which internal Audits was thought for.
- Any key findings during risk assessment of accounting procedure
- 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 Indore, Madhya Pradesh
- 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 Indore, Madhya Pradesh. With a competent service provider, your company will be able to reap all of the benefits that account payable outsourcing in Indore, Madhya Pradesh has to offer.