Accounts Payable Outsourcing
The Accounts Payable Function is the crucial function for every company since it involves nearly all payments of an entity outside of Payroll. Aristotle Consultancy understands the importance of creating a strong and well implemented Accounts Receivable Outsourcing Process so that stakeholders get accurate and complete financial statements. Our strong and well managed Accounts Payable Process ensures efficient and effective handling of process within defined SLA & TAT. Our solutions are flexible and can be customized as per need, budget and complexities involved.
Aristotle provides technology driven and process oriented end to end Accounts Payable solutions to the clients, which empowers them to focus on their core business.
A quick look at the Accounts Payable solution offered below by Aristotle, will help you understand the seamless and independent approach followed by our Accounts Payable team.
The Benefits of Outsourcing Accounts Payable
Our Accounts Payable solutions offer unparalleled benefits to client as mentioned below-
- Efficient & effective handling of process within defined SLA & TAT
- Review of SLA matrix, performance and TAT compliances
- Sharing of periodic Scorecards & Dashboards to management
- Standardized Process and adequate Internal Controls
- Quality Assurance
- Escalations to handle exceptions
- Scheduled reviews and meetings with client to fill any gaps
Managing relationships with the vendors and suppliers is a challenging task for a company operating in India. More the vendors, the more the probability of errors in the accounts payable process of the company. An inefficient accounts payable 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 India.
Most businesses in India 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 India 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 India?
In accounts payable outsourcing in India, a third-party team manages the accounts payable processes in India 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 India offer an advantage to the businesses that to completely redo their existing and outdated accounts payable processes.
National capital New Delhi is conveniently placed on the northern part of the country with Haryana and Uttar Pradesh as adjoining states. Headquarters of many government departments and ministries along with other principal offices of the government are placed here. It is among the fastest growing regions of India with an unfailing growth rate of 12.82% as on 2018-19 (GSDP at current prices). Being the capital of the country, it hosts many trade fairs and has abundant tourist foot fall throughout the year. Major tourist attractions include variety of cuisines, rich cultural heritage, street shopping and other random attractions. This region is a desirable place for real-estate investors and agri-based industries. The city is bestowed with a total power generating capacity of 2453.37 MW which is phenomenal.
Inhibited with a dense network of Metro rail lines, the city is linked with 285 stations to the adjoining National Capital Region (NCR). This robust project is the result of a joint venture between Government of NTC and Government of India which proved to be a revolution in mass transport services in India and is the largest network in the country. Furthermore, 24,000 km of road lanes run across the region, Yamuna river flows through the city of Delhi. Indira Gandhi airport is one of the best airports in the world and has a prominent presence on the international air map.
In this relatively small region agri and food processing units flourish as a result Delhi and the adjoining NCR region is known for its dairy production and livestock. Milk yield for the year 2015-16 was 281,000 tonnes, with Amul, Delhi Milk Scheme and Mother Dairy co-operative milk societies being the key players. The resultant to such initiatives is that this city has the second highest per capita income in the country.
With as high as 456 random developmental projects currently running across the state, 5 are privately owned and funded and the balance 451 are taken care by the Government. Spread across 11 districts and held by 130 promoters. The gross valuation of such schemes which is more than $669.97 bn. Some such projects running here are Solar Power Project with costs $63.66 bn, Pradhan Mantri Awaas Yojana Gramin valuing $59.47 bn, Wind Power Project of about $56.56 bn, Pradhan Mantri Gram Sadak Yojana Project worth $50.31 bn and many more among such advancement schemes are currently active here.
Benefits of Accounts Payable Outsourcing in India
Accounts payable outsourcing in India 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:
Efficient management of accounts payable in India 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.
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 India have to hire and train the staff to manage the accounts payable process. Outsourcing Accounts Payable in India 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.
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.
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 India use advanced technology and invoice processing automation, which are very less likely to suffer from costly human errors.
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 India 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 India
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 India
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 India
- 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.
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 India. With a competent service provider, your company will be able to reap all of the benefits that account payable outsourcing in India has to offer.