Vendor management or Supplier Management is crucial for businesses looking to scale or upgrade their operations even as the global supply chain faces challenges. It also ensures that your relationships with the vendors are transparent and that you build long-term strategic partnerships that benefit all parties. Continue reading to understand the meaning of supplier management or vendor management systems, processes, and tools.What is the Vendor Management Process? Vendor management or supplier management is managing and communicating with suppliers (vendors) to prevent third-party disruptions. It includes the following activities: Selecting vendorsOnboarding vendorsNegotiating contractsTraining them to use your platformControlling costsReducing vendor-related risksEnsuring deliveryEvaluating performanceThese activities ensure suppliers or vendors work perfectly and in tandem with your organisational goals. Unlike most business processes, vendor management can’t occur in silos. It is a coordinated effort between the following operational areas: Procurement managementContract managementThird-party risk managementImportance of Vendor Management Vendor management or supplier management ensures distribution-free business processes, but to what extent? Let’s find out: It improves the communication and coordination between a firm and its vendors. This could improve vendor service quality, better pricing, and timely delivery. It also ensures that your vendors meet your quality, safety, and legal requirements standards. A robust vendor management system would monitor the risk involved in vendor management and help you mitigate any risks. It can also help you optimise the costs and benefits of working with vendors by helping you negotiate better manage payments and early payment discounts.Why do businesses need an effective vendor management process? An effective vendor management process or supplier management process helps you stay on the path.

The Accounts payable of an organisation represents the accumulated unpaid supplier balances. The days payable outstanding (DPO) is a financial ratio that indicates the average time the organisation takes to clear these supplier invoices. The longer the payment cycle is stretched, the longer the company can hold cash to meet its operational requirements.In this article, we discuss the meaning and importance of days payable outstanding and the formula for calculating the days payable outstanding.Meaning of Days Payable OutstandingDays payable outstanding (DPO) refers to the financial ratio signaling the average number of days a company takes to pay outstanding invoices from its suppliers or vendors. It is usually calculated quarterly or annually to review how the company's cash flows are being managed. In simple words, the DPO is the average number of days between when a company receives its supplier invoices and pays them. For example, if a company's DPO is 75 days, it means that the company took 75 days on average for paying its suppliers.

You got a whiff of culinary pride – India, the world's third-largest producer of cooking oil! But before you could do a victory dance in the grocery aisle, Mrs. Kamini had a reality check waiting for us. She revealed that our country still meets nearly 60% of its consumption requirements through imports! The Accounts Payable team claims it’s been a while since the Indian edible oil companies have been crippled by several supply chain bottlenecks, especially global. Higher freight rates due to the Red Sea crisis add more fuel to the existing problem. It has affected the smooth and timely procurement of raw materials and, in turn, the accounts payable (AP) process.Continue reading the story on how her team suppressed the supply chain challenges through technological interventions and policy revamps.How Supply Chain Bottlenecks & Inefficiencies Became an AP ProblemCompanies that source ingredients globally often face complexities in currency exchange rates, customs regulations, and international trade agreements. Their procurement teams navigate these global trade challenges.

Accounts payable (AP) turnover ratio is a liquidity ratio used to measure how quickly a company pays its bills to creditors in a certain period. It is also known as creditor’s turnover or payables turnover. Accounts payable are short-term debts for the firm for purchase of goods on credit basis, listed on the balance sheet under current liabilities.Continue reading to find out its meaning, formula, and interpretation with examples. What is the Accounts Payable Turnover Ratio?The accounts payable turnover ratio is a short-term liquidity measure which quantifies the rate at which a firm pays off its payables. Payables are the amount a firm owes to its creditors and suppliers for the purchases made. And the accounts payable turnover ratio shows how often a company pays off its creditors in a certain period. What is the Formula for the Accounts Payable Turnover Ratio?The accounts payable turnover ratio is calculated by dividing the company’s total purchases in a period by the average payables for that period.

2-way and 3-way matching in accounts payable is a vital task for an organisation. It ensures that you pay for what you have purchased and helps in avoiding fraud. This process allows the business to save time and money, reduce mistakes and grow faster.What is 2-way and 3-way matching in Accounts Payable?2-way matching in accounts payableIn a 2-way matching system, the accounts payable team verifies the information on the purchase order with the invoice to check if the tolerance levels are met. 3-way matching in accounts payableIn a 3-way matching system, the accounts payable team verifies that the information on the purchase order, invoice, and goods receipt note (GRN in case of goods, SRN in case of services) are the same. If they match, the supplier’s invoice will be approved for payment. It also helps decide if an invoice has to be paid partly or in full.Documents involved in 2-way and 3-way matchingThe documents involved in 2-way and 3-way matching are:Purchase orderInvoiceGoods Receipt NoteService Receipt Note or Service Entry SheetBenefits of 2-way and 3-way matchingIt avoids overpayment: The matching process eliminates the risk of overpaying a vendor and protects businesses from unnecessary expenses.

Looking for the best automation tools to manage your accounts payable can be challenging. This article talks about the top AP automation software for enterprises, both large and small, to help make handling invoices easier and more efficient.What is an accounts payable software?Accounts payable software is a program that assists companies in organising their invoices and the payments they need to make. It monitors all the invoices from suppliers or service providers and ensures they get paid promptly.This software also saves time by taking over the job of punching in the invoices, verifying them for correctness, and tracking the payments.Think of it as a digital helper that takes care of all the document management and payments so companies can avoid the stress of missing an invoice payment or making mistakes in how much they pay.What is accounts payable automation?Accounts payable automation means using technology to make the process of dealing with a business's invoices and payments to suppliers easier and better. Instead of doing things by hand like sorting out invoices, typing in information, checking details, and giving approval for payments, this technology does all that work.It processes invoices on its own, matches them with orders, gives the approval for payments, and can even handle the payments through electronic means. This speeds up the process, reduces errors, saves money that you would otherwise spend on employees to do these jobs, and helps control cash flow better. It's like having a smart system that ensures your invoices are correctly and timely paid, without needing your constant supervision.What are the benefits of AP automation? AP automation helps businesses in several ways:Makes things more accurate:: When people enter data by hand, mistakes and mix-ups can happen, leading to wrong numbers in the books.

When dealing with a large number of invoices, managing them and keeping a record of the invoice information manually becomes a complex task for the Accounts Payable team. Invoice extraction methods can really help in dealing with it. But what exactly is invoice information extraction? Let's delve into the essence of this process and understand its significance in the operational workflow of enterprises.What is invoice information extraction?Invoice extraction refers to a process in which enterprises use software to automatically get key details from invoices, like vendor information, invoice numbers, and totals, from various formats including scanned documents, PDFs, and e-files.The methods include Optical Character Recognition (OCR), machine learning, and intelligent data capture. Why is invoice information extraction important?Invoice extraction is crucial for businesses as it speeds up understanding and using invoice data like payment amounts due. This method saves time and lowers errors versus manual entry, ensuring accurate and timely payments.It's like having a smart helper to efficiently organise and manage all the money matters.What are the different types of invoice information extraction?Majorly there are three main types of invoice information extraction:Optical Character Recognition (OCR)Intelligent Data CaptureMachine LearningIncorporating these technologies into the invoice processing workflow can transform how enterprises manage their accounts payable, significantly improving efficiency, accuracy, and scalability. As each technology offers unique benefits, the choice among them—or a combination thereof—depends on the enterprise's specific needs, existing processes, and future goals.Different types of invoice extractionThe following are the types of invoice extraction:Optical Character Recognition (OCR): OCR reads text from documents, converting them to a digital format that can be modified or searched.

Turning traditional paper invoices into digital ones with Optical Character Recognition (OCR) technology is an advanced but simple method that automates the transformation.To digitize invoices using OCR, follow these three main steps:1. Uploading the Invoice to the OCR SoftwareThe first step is to upload an image or PDF file of the particular invoice to the OCR software.This can be done through a mobile or web application. After the upload, the software performs an initial scan to optimise the image quality.2. Converting the Image into a Text FileAfter the optimisation of the image, comes the next step of converting the invoice image into a text file.This is achieved by analysing the light and dark patterns of the image to identify letters and numbers, transforming the visual data into editable and searchable text.3. Parsing TXT into JSONThe last part of the OCR (Optical Character Recognition) process changes the text file into a structured format like JSON (JavaScript Object Notation).

Our relationship with the vendors has a big role in defining our business efficiency.Vendor compliance checks can help us in maintaining this relationship.In this article, we will discuss vendor compliance and how it can help us improve our business's efficiency and operations.What is vendor compliance?To make sure that the products or services meet the quality, every business sets some standards. The vendors must follow these standards for delivering their products or services. This is vendor compliance, as it’s referred to globally.In India, vendors must also follow GST tax rules. This involves timely reporting of invoices in GSTR-1 or through the Invoice Furnishing Facility (IFF), crucial for the smooth functioning of the Input Tax Credit (ITC) mechanism.Following these rules makes business transactions clear and responsible. Including GST rules with other quality checks helps businesses work smoothly and follow the law, making a better market for everyone in India.Need for vendor complianceSeveral key factors highlight the importance of ensuring vendors meet certain standards:Avoiding Operational Issues: Vendor compliance helps ensure that the materials enterprises buy are of good quality.

A successful business is all about money management and how various enterprise teams improve the cash flow.One of the important parameters for improving the cash management of a business is DSO!Let’s discuss some essential things that you need to know about DSO.What is Days Sales Outstanding (DSO)? Imagine selling a product today and letting the buyer pay later. DSO measures how many days it takes, on average, for you to actually receive that money. DSO is a parameter that tells you about the average time that will take for your company to receive payment following a credit sale.How to Calculate DSO?You might have started getting eager about it. “How can I calculate my company’s DSO?”. To figure this out, we need to know some things beforehand.The total amount of money customers owe youThen, look at the value of goods sold on credit over a period, say, a month.The number of days in the period.Formula of DSO:The formula for DSO is as follows-DSO = (Accounts Receivable / Total Credit Sales) × Number of Days in the PeriodWhere,Total Accounts Receivable is the amount of money that the customers owe.Total Credit Sales is basically the net revenue.Example of Days Sales Outstanding CalculationLet’s try to understand them with the help of an example.Imagine an enterprise selling furniture. At the end of June, customers owe the enterprise a total of Rs.5,000 for the furniture they bought on credit. So, this Rs.5,000 is their total accounts receivable.Throughout June, the enterprise’s total credit sales were Rs.20,000. Now, let's calculate DSO for June, which has 30 days:We know that, DSO = (Accounts Receivable / Credit Sales) × Days in PeriodSo, by using the formula: DSO = ( 5000 / 20000) × 30 = 7.5 daysThis means, on average, the enterprise is getting paid in 7.5 days after making a sale on credit in June.High DSO vs.