Managing relationships with the vendors and suppliers is a challenging task for a company operating in Nagpur, Maharashtra. 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 Nagpur, Maharashtra.

Most businesses in Nagpur, Maharashtra 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 Nagpur, Maharashtra 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 Nagpur, Maharashtra?

p style=”text-align: justify;”>In accounts payable outsourcing in Nagpur, Maharashtra, a third-party team manages the accounts payable processes in Nagpur, Maharashtra 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services in Nagpur, Maharashtra offer an advantage to the businesses that to completely redo their existing and outdated accounts payable processes.

Maharashtra is the 3rd biggest state in terms of geographical area, i.e. 9.4% of the total area of the country. The state lies on the West coast and is well connected with in the country by a dense network of roadways stretching around 3,09,000 km and railway linkage of around 6,210 km within the state. It marks a strong presence on the air map with 4 international and 7 domestic airports. The shoreline of the state is nearly 720 km, with 55 ports which facilitate transportation of 22% of the total cargo transport of the country. Jawahar Lal Nehru Port Trust (JNPT) is located here and is linked with 46 Inland Container Depots (ICD), 34 Container Freight Stations (CFS). The state supports it’s industries with the installed power generating capacity of 43,000 MW.

The state has the highest GDP, 2nd highest FDI inflow during 2020-21 at 28% in the country and Ranks No. 1 in Export Preparedness Index in 2020. FDI for the period Oct -2019 – Sept 2020 aggregated over $10.8 Bn and for the period Oct -2019 to March 2021 the state’s contribution for the FDI was nearly $23.43 Bn. Mumbai, the state capital is popularly known as the Financial Capital of India and is home to most headquarters of all major corporate and financial institutions.

Information Technology is one of the key sectors of the state, accounting to more than 20% of the country’s software exports. Pune, Aurangabad, Nashik and Kohlapur are the major export cities from the region. The government has developed 37 IT parks and also approved 472 others and the State’s Industrial Policy offers policies regarding various infrastructural investments like exemption on filing patents and Knowledge Parks etc.

Maharashtra holds 30.5% share in industrial output of ESIDM sector. The state also has 3 Electronic Manufacturing Clusters (EMC) in Pune, Aurangabad and Navi Mumbai, with facilities for testing and R&D. Well established ESDM hubs are located in Khed and Talegaon in Pune. They enjoy locational benefits of being directly connected to JNPT and Mumbai port, the largest ports of the country.

With a robust presence, Maharashtra shares 35% of the total output of Automobiles by value with the assistance of committed manufacturers and a network of component suppliers and vendors. Major centres are located in Pune, Aurangabad, Nashik and Nagpur.

The state is the major producer of Arhar and Jowar, contributing 29.11% and 46.09% respectively to the aggregate yield of the country. Ranks #2 in the production of bananas, cashew, pulses, cotton and sugarcane. This region tops the chart in the production of Grapes and provides stimulation to the grape processing and wine industry with the help of dedicated wine policy and wine parks. 8 Food Parks and 3 Floriculture Parks with superior facilities are established here. Thus, Food Processing industry in the state is worth $158 Mn by way of 173 projects initiated during the years 1992-93.

An ace producer of cotton, bamboo and silk fibers, textile sector generates 2nd highest employment opportunities in the zone after agriculture. 14 private and 10 government textile parks are set up with plug and play facility. The government has launched Textile Policy to ensure various incentives to the sector by way of tax exemption, interest subsidy and up gradation subsidy, with a mission to generate 1 mn new job prospects by year 2023. Bombay High is the largest producer of offshore oil in India. Bollywood, world’s largest film industry in term of viewership is based out of Mumbai.

With a fairly good sex ratio in the state, 929 females per 1000 males. 66% of the total population of the region falls between the age group of 15-59 years and is the 2th most populous state of the country, with 112.4 million citizens residing i.e. nearly 9% of the country’s population, which is equivalent to the population of Mexico on their 1/6th of their land area. This state has 1 Central University, 23 State Universities, 21 Deemed Universities, 14 Private Universities, 885 Engineering Colleges, 227 Business Management Institutes, 438 Pharmacy Colleges and 474 Industrial Training Institutes.

The aggregate value of investment opportunities in Maharashtra is nearly $815.58 bn, comprising of a total of 1195 projects out of which 45 are private and 1150 are Government owned projects, with 242 promoters involved, spread across 39 districts of the state, which makes Maharashtra a perfect breeding ground 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 Nagpur, Maharashtra

Accounts payable outsourcing in Nagpur, Maharashtra 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:

Accounts Payable Outsourcing India

Profitability

Efficient management of accounts payable in Nagpur, Maharashtra 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 Nagpur, Maharashtra have to hire and train the staff to manage the accounts payable process. Outsourcing Accounts Payable in Nagpur, Maharashtra 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 Nagpur, Maharashtra 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 Nagpur, Maharashtra 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 Nagpur, Maharashtra

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

accounts payable outsourcing india process benefits

Checkpoints for Audit of Accounts Payable Outsourcing process in Nagpur, Maharashtra

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 Nagpur, Maharashtra

  • 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 Nagpur, Maharashtra. With a competent service provider, your company will be able to reap all of the benefits that account payable outsourcing in Nagpur, Maharashtra has to offer.