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Payables

Simplify and streamline your outgoing payments

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Receivables

Efficiently manage and optimize incoming payments

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Author: Rama Kannan

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Receivables

Can Technology Make the Collect and Track Payment Process Easier?

Collect and track process

If you are part of the finance team in a startup, you know that collections are probably the lifeblood of the company apart from being the toughest function.  Thankfully today we have the means to ease the collect and track process due to technology.

Let’s start by looking at what the collection process looks like, the definition of track and collect, and at what points technology helps.

Where does the collection process start?

As a business in today’s competitive world that supplies products or services to other businesses, it is imperative to offer some credit terms. This means it actually starts when your sales team closes a deal with another company, then the terms of the sale are discussed, which include the quantity, specifications, frequency, and payment terms.

In many businesses, the finance and sales teams work together to determine whether they can offer delayed payment terms to the buyers so that they can offer attractive terms. Post this stage, the sales team has lesser involvement and it is upon the production team to deliver the goods and the collections team to collect the amounts due. Once the goods are delivered, the proof of delivery and the order details are handed to the finance team.

The finance team then creates invoices and transmits them to the customers a few days before the due date. This is followed up by another invoice on the due date. If the payment is made, then the finance team tracks the payment details and marks the customer’s records with the details. If the customer has not paid, then the finance team follows up with further collection requests, calls, and finally with legal recourse. It is important not only to collect payments from customers but also to trace the amount to the right account for several reasons. These include

  • Collect and track helps decide whether to continue selling to customers on credit or stop future transactions
  • Updated collections ensure that your team does not waste collection efforts on customers who have already paid
  • Your team can help improve the overall customer experience by ensuring that the collections are tracked properly and avoiding unnecessary reminders
  • Collecting on time and tracking the amounts to the customer accounts helps you plan your cash flow better

How does technology help with the collect and track aspect?

The scenario described above sounds simplistic but becomes complicated when you are dealing with a multitude of customer accounts, numerous transactions, and repeat orders in a running business. Thankfully, technology has made it easier to complete the process with minimal errors and manual effort.

Let’s look at how technology helps in the various steps involved in the collect and track process:

Onboarding and evaluating customers’ creditworthiness

Once the sales team closes the deal, the finance team takes over the customer onboarding with the requisite KYC details and financial statements. With technology, the onboarding process becomes quicker and easier to verify to determine the credit terms of the sale. Customers have the choice to upload verified documents and the finance team can access financial records online to quickly assess the customer’s creditworthiness and decide on the credit sales terms.

Set up ledger accounts with transaction details

Once the onboarding process is completed, the finance team usually creates a ledger account, which is then used as a single source of truth for all departments. This includes the production unit, the logistics department, and so on. As time passes and further transactions take place, the ledger is updated automatically. This entire process can be digitized and entries will be updated automatically to ensure that all information is up-to-date.

Track goods sent, and file the ‘Goods Received’ document

Once the order to the customer is fulfilled, the transportation department gets a sign-off on the receipt of the goods to ensure that the customer is happy with the quantity and quality sent. In case there are discrepancies, the customer can make a note of it and add comments to the document at the time. This entire process can be done using technology so that the document is updated in real-time.

Create virtual accounts for different customers

Using the various details shared at the onboarding stage, your accounts department can use technology to create virtual accounts for your customers. This, in turn, helps in the reconciliation of accounts at the time of payments. It becomes easier to track if the complete payment has been made or if there are any discrepancies.

Make and send invoices with payment links embedded

With the use of technology, creating invoices with all the details (like the goods or services delivered, pricing, quantity, and quality parameters)can be created with a few clicks and sent on time. What is more, you can also embed a payment link that will enable the customer to make payment with ease. If you are wondering how to track your customer’s UTR number, then the payment link will make it easier.

Send reminders with payment links for easy payment

Sometimes the right person at your customer’s business may have not received the invoice or simply forgotten about it. Technology enables you to send reminders at preset timings and ensures that you can keep following up. With technology, it is also feasible to embed a payment link to help the customer make payments on time.

Track the payments received and tally against customer accounts

Often finance team will tell you that is a nightmare to track payments that you get from customers against the order number and reconcile the numbers. With technology, this step becomes quicker and foolproof, and not only that, but you can also generate reports and analytics to help you understand the cash flow requirements.

Decide on whether to continue giving credit and how much

Payment history is important to determine whether to continue selling to the customer on credit or not. Technology helps you identify which of your customers is a habitual defaulter or late payer, you can impose stringent conditions when selling to them.

Alternatively, decide on the next steps if the customer does not pay

Another aspect that technology helps you is also to make the decision on whether or not you want to take legal action against the customer in question. You can set rules in your platform to let you know when there are more than a certain number of defaults that occur with a particular customer account and take the next steps accordingly.

At EnKash, we help our up-and-coming customers deal with the collect and track process by enabling various aspects like virtual accounts, payment links, quick collect, bulk collect, and much more.

Categories
Expenses

Why Is Vendor Reconciliation Essential and How to Make It Simple?

Why is vendor reconciliation essential

Reconciliation of accounts, whether it is bank versus cash or collections and receivables or anything else is an ongoing process. When done manually, the process of reconciliation can be time-consuming and prone to errors. In this article, we will look at vendor reconciliation, why it is essential, and how to simplify it to ensure continuity and consistency.

Vendors are the lifeline to your business by ensuring quality supplies in a timely manner. As a startup with numerous priorities, it is important to manage your vendor network in the best possible manner. This will ensure that not only do you get quality supplies from vendors but also get good rates and maintain a positive market reputation.

What does the vendor management process entail?

To understand this better, let’s start by looking at the vendor payment cycle. The vendor onboarding process in general, has the following steps:

  • Identification of the product or service that you require from the vendor, the frequency, the quantity, and quality parameters defined in clear terms
  • Then the procurement department calls for quotations from a list of vendors who can meet these parameters
  • Once the quotations are received, they are evaluated, and a vendor is finalized with the issuance of purchase order (PO)
  • The vendor supplies the product or service and raises an invoice as per the terms agreed asking for payment
  • The finance department forwards the invoice to the relevant department to confirm if the supply was made as per the agreed terms
  • Once the concerned department checks and confirms this, then the department head approves the invoice for payment
  • The invoice is taken up by the finance department along with approvals to make the final payment
  • The process repeats itself without the first three steps, which is the procurement process

Sounds simple enough, doesn’t it? While the process is fairly straightforward it can get complicated and error-prone, it becomes time-consuming when you add numerous vendors, different payment cycles, and the needs of various departments and branch offices. And that is the case with most businesses.

What is the vendor reconciliation process?

Vendor reconciliation is the process by which the finance department confirms that

  • The supply of products or services is as per agreed terms
  • Whether the pricing is correct or not
  • If rebates and discounts have been applied for on-time payments
  • Payments have been made or not and from which bank account

What happens if vendor reconciliation is not handled properly?

Vendor reconciliation is an important step in the process of vendor management. The reconciliation process throws light on various aspects, which include the following.

Meeting business requirements

The vendor reconciliation process highlights whether vendors are supplying as per the quality parameters and quantities agreed upon at the right price.  This, information in turn, helps you determine if you need to continue with the same vendor or change the vendor.

Price reconciliation

The process of reconciling also helps you determine whether the vendor is charging the right pricing and giving you rebates for making payments on time. You can also determine that factors like taxes are in the right order.

Supply continuity

Reconciling details of the vendor supplies and ensuring payments go on time also helps ensure that the vendor continues to supply as agreed. The continuity of vendor support ensures that you can meet customer demands.

Avoid double or missed payments

Vendor reconciliation helps ensure that you have not paid the same vendor for a single invoice twice by mistake or missed paying an invoice entirely. Tracing these details can make it easier to manage vendors in the long run and keep your financial records updated.

How to make vendor reconciliation process simpler?

Fortunately, today we have the advantage of advanced technology to help us manage the entire process with ease. A smart spend management platform like EnKash, will help you with various aspects of vendor reconciliation. Onboarding vendors becomes easier with the digitization of the KYC (know-your-customer) process. Once all the details are recorded on the portal, it is easy to have an overview of the spend against each vendor.

Also Read: What is Vendor Payment, and How Does It Work?

The invoices asking for payment can also be digitized and viewed on the system. The details can be matched with the PO with ease, sent for checking and approvals from within the system. Once the payment has been made, the requisite entries can be made in real-time. In fact, you even have the option to generate reports and analytics to delve deeper into the spend and optimize spends when required.

Categories
Growth Guide

7 Tips to Improve Business Expense Reimbursement Processes

Business expense reimbursement processes

A business without any expenses is impossible because you need to spend on various aspects. These include the raw materials that you need to run your core business, the vendors who keep your office working, utilities, taxes, salaries, and so much more. In this article, we will discuss one aspect of expenses, which is the expense reimbursement process.

What is expense reimbursement?

Ideally speaking, businesses should make payments directly towards the expenses they incur but this is not always possible. One such aspect is when an employee makes payments on behalf of the company. In such cases, the employee has to claim the amount through a business reimbursement process.

This sounds simple enough in theory but in practicality, it is anything but. Let’s take a look at a typical scenario and detail the steps involved.

Imagine that Raj is an employee of PQR corporation. Raj heads the sales department and is in charge of demonstrating the product to customers and closing the deal. As part of his job, he travels a lot to the client’s location so that he can demonstrate the product, negotiate the price, and close the deal. Once the deal is closed, he also brings in his team to deploy the product, train the team on usage, and then solves issues in real-time if they occur.

At every point of his work, Raj has to make payments for expenses on behalf of the company. To travel, he needs to book tickets, book accommodation, and arrange for local transportation as well. When he meets the customer’s officials, there’s a likelihood that he has to entertain them by taking them out for lunch or dinner. After he closes the deal, he has to arrange for the travel and accommodation of his tech support team and ensure that they have the right support work onsite. In some cases, he may also be required to purchase data cards or other support material to quicken the process.

In a manual expense reimbursement scenario, Raj will have to start his travel arrangements by asking the company for some advance amount. Then keep track of every expense incurred, by collecting receipts and invoices as applicable. Not only that, Raj also has to make sure that the spend is as per the set limits based on the company’s policies.

In case there are exceptions, Raj has to get the right approvals in place to complete the payment. Once the work is finished onsite, he has to create an expense sheet with all the expenses detailed out and submit it to the finance department along with the required documentation (tickets, boarding passes, hotel bills, cab fare bills, entertainment bills, etc).

Since Raj is a busy man, with several responsibilities, he may miss out on a few expenses and bills. In many instances, he may be frustrated that he has to go through this process, each time he travels for the company business. And when audit time comes around, the finance department may reach out to him seeking clarifications on certain expenses. He may often have to refer to his memory or some rudimentary notes to recall the details.

And this is only one expense category that we are talking about. A startup like yours is likely to have numerous expense heads for which you need to optimize reimbursements. Then, what is the solution to make expense reimbursement easier?

Here are 7 tips to make the entire process seamless and quick.

Define expenses that occur frequently

The first tip to ensure that you are streamlining expense reimbursements is to define which expenses occur frequently and cannot be managed centrally via the finance department directly. For instance, expenses like rent, utility payments, etc occur regularly and are easier to manage because they occur without major variations month-on-month.

Create an expense reimbursement policy

It is important for a company, no matter if it is a huge enterprise or a startup, to have a clearly defined reimbursement policy that defines amounts that can be spent for each level of employees. For example, a vice president will have a higher limit for entertainment expenses as compared to junior executives. In the same way, travel in a Tier1 city will need a higher limit as compared to a Tier2 city and so on.

Opt for a spend management platform

This is a vital step and will eliminate most of your expense reimbursement process hassles, as you can configure your expense categories and policies within this system itself. What is more, a smart spend management platform like EnKash allows you to configure many aspects and track expenses in real-time to plan your cash flow well with the help of reports, insights, and analytics.

Provide cards for specific spend categories and limits

With a smart spend platform like EnKash, you can also apply for a collateral-free corporate card, having a credit limit of up to Rs.1 crore. You can further allocate this credit limit to different departments and employees by issuing cards to them. Furthermore, you can configure the usage for the cards and restrict usage for specific spend categories as well as set limits. For instance, keeping the example of Raj in mind, you can issue a travel card to him, which he will be able to use for booking tickets and paying hotel charges. He will also be given a particular limit to spend based on past records.

Set hierarchies as per departments

To make the expense reimbursement processes seamless and foolproof, you can also set hierarchies within the department by assigning maker, checker, and approver levels. This can be configured as per the level of the employee making the payment as well as the needs of the department. For instance, spends made by departments other than the finance department can have more levels in the hierarchy as compared to the finance department.

Ensure approval levels within the platform

Since the whole expense reimbursement process is driven within the platform, you can also ensure that the approvals are also recorded there itself. For instance, when Raj wants to spend a certain amount on entertainment expenses, he can raise the request to the director of sales who can approve within the system creating an effective audit trail.  When the time for audits come around, these records can be assessed from the platform without Raj having to spend too much time on it.

Enable digital receipt submission

One of the crucial aspects of expense management is ensuring that all the receipts and invoices supporting the spend is available. A spend management platform will help you in this aspect as well. Raj, in our example above can simply scan the receipt for what he paid using the card and upload it to the system in real-time. There is no need to collect paper invoices and submit them manually. All Raj has to do at the end of his business travel is to have someone take all the receipts he has and put them in a file for future reference, if required.

Also Read: What Are Non-operating Expenses and What Is Their Impact?

At EnKash, we have been helping startups like yours manage many aspects of finance including expense reimbursement processes with the use of secure and easy-to-use technology.

Categories
Growth Guide

How Does Fintech Support Financial Operations?

financial operations

Today the face of financial operations has changed so much that if you asked someone from an earlier age about it, they would say it is completely unbelievable. And one of the main reasons for the change is financial technology or FinTech as it is popularly called. FinTech or fintech as it is sometimes referred to is the use of technology to make financial operations secure and more accessible.

Unlike the popular opinion, the fintech revolution started a while back when instead of visiting the bank branch to withdraw money, people started using automated teller machines (ATMs). However, the use of technology in financial services kept relentlessly moving forward with the entry of cashless transactions in the form of credit and debit cards.

However, the movement gained even more momentum with the demonetization that occurred a few years back and consolidated with the pandemic. Since fintech had picked up speed, it continued to support connected financial operations. Today, all you need is a mobile device and an internet connection to get access to all forms of financial services.

How Fintech supports financial operations?

To understand this better, we need to look at the role that banks play in helping those with accounts in them, whether it is an individual or a business.

Maintain accounts

Banks allow customers to open an account with them, either savings or current accounts to allow them to keep their amount. Fintech facilitates this by providing the technology to keep track of your accounts without visiting the bank branch.

Facilitate payments

Earlier banks used to help customers make payments using various financial instruments like cheques, demand drafts, etc., to the people they own money to. Today, fintech facilitates payments without the need for physical instruments using cards, net banking, UPI, and so much more.

Lend funds

Banks have always paid an important role in fulfilling the needs of individuals and businesses by lending them funds as and when required. In this aspect too, fintech continues to play a critical role in this aspect as well. Today, fintech provides the basis for lending of funds by providing credit scores, e-documents, and other details.

Transfer of cash

Banks would allow you to transfer funds to others using various means and they continue to do so. However, fintech has stepped in here too by facilitating various methods (sometimes across borders) to transfer funds and speeding up the process immensely.

Assimilate collections

If you are a businessman, you know the importance of collections to keep your business going. Banks have always played an essential role in the process of collections. Today, fintech helps make this process more secure and efficient with payment links, gateways, and other means.

Insights into spend

Banks offer statements of the deposits you have received and the payments you have made to help you get insights into spend. However, fintech goes one step further and provides you with analytics and insights into areas you spend more on and the delays you have in collections. These insights help you understand the next steps you need to take to manage your spends better.

At EnKash, we believe that fintech is at the core of your financial health. With that in mind, we are proud to offer Asia’s 1st and smartest spend management platform to our customers to help them use technology for secure and seamless finance management.

Categories
Expenses

Learn about the 5 Differences between Expenses and Expenditure

Expenses vs Expenditure

Are expenses and expenditures really different? If yes, what are the differences? These must be some thoughts running through your head when you read the title. However, the fact is that the terms ‘expense’ and ‘expenditure’ have some subtle differences and it is crucial to understand what these are. Let’s dive deeper without much delay.

What do expenses mean?

Expenses can be defined as the cost a business incurs to procure goods or services. Any expense that a company incurs is noted or recorded in the income statement as a negative figure in the column denoting revenue. Expenses need not always be related directly to the products or services that a business sells.

How many types of expenses does a business incur?

In most cases, expenses can be divided into two categories—direct and indirect expenses. Direct expenses are those expenses that are incurred toward the products or services that the business transacts. Indirect expenses are also called overhead and include expenses like rent, marketing, and other such expenses. Furthermore, the payments toward expenses can either be fixed or variable. For instance, rent is a fixed expense that needs to be paid consistently at fixed levels on a regular basis. Payments like consumables and commissions to salespeople can vary according to many factors.

Now that we have an idea about what expenses mean, let’s take a look at what expenditure means before moving on to the differences between the two.

What does expenditure mean?

Expenditure relates to the outflow of funds that are related to the business. Expenditure relates to the payment you make toward expenses and therefore has more to do with the cash flow of the business.

What are the different types of expenditure?

Generally speaking, most businesses categorize expenditure as capital expenditure, operating expenditure, and discretionary. As the name suggests capital expenditure relates to the money you pay towards capital equipment.  In the same way, payments made toward operations related to the running of the business, including rent, salaries, utilities, and more are considered operating expenditure. Discretionary expenditure are those payments that are more of a choice than an absolute necessity. These include advertisement, employee recreation, etc.

Also Read: What Are Non-operating Expenses and What Is Their Impact?

What is the difference between expense and expenditure?

Expenses can be defined as the costs you incur for your business during a particular period while expenditure refers to the payments that your business makes during a time period. Often businesses incur an expense that they are committed to paying but delay the payment, even though it reflects in their book of accounts as an expense. Once the payment is made it becomes an expenditure.

differences between expense between expenditure

As Asia’s 1st and smartest spend management platform, EnKash offers you the means to streamline, track, pay, and control your expenses. And our dashboard shows you the clear position of expenditure to plan your cash flow better. 

Categories
Growth Guide

BaaS—Banking as a Service—All You Need to Know About It

BaaS - Banking as a Services

Today it is not unusual to come across terms like SaaS (software as a service) and BaaS (banking as a service). While software as a service has become the norm rather than the exception, BaaS still remains confusing for many people.

What is BaaS?

BaaS (Banking as a Services) takes a holistic approach to banking and allows fintech companies and other third parties to connect with banks, using APIs.

How does BaaS add value?

BaaS enables organizations to create and offer financial services, using the bank’s base infrastructure to enable improved banking services. Since the services that are part of the BaaS (Banking as a Services) portfolio are based on banking itself, they take core services and make it better.

Here are some instances where BaaS adds value:

Facilitate collections

When you are a business selling products or services to other businesses, then the collection function plays a pivotal role in ensuring that you have a healthy cash flow. When you collect funds from a customer, the usual process is to ensure that it reflects in the bank. BaaS offers you multiple ways to enhance the collection process by automating invoices, embedding payment links, sending reminders, and above all these, it also ensures that you have complete visibility over the entire process.

Enable payments

As a thriving business, it is vital to have a good working relationship with your suppliers and vendors to ensure uninterrupted supplies. One of the critical factors to this is to make payments on time. BaaS (banking as a service) makes the process of keeping track of payments and making them on time with the right approvals with complete transparency and security. BaaS also facilitates other regular payments like rent, utilities, taxes, etc., with regular reminders, automatic retrieval of invoices, and offering many options to pay the amount.

Issue cards

While banks are the core issuer of cards to customers with specific limits, BaaS provides corporates to further issue co-branded or other types of cards. As a result, companies will find it easy to empower their employees to make payments for business-related expenses.

Speed up KYC

Know your customer or KYC is an important part of the banking industry. With the use of BaaS, this process can be cut short and made more efficient and accurate. With BaaS, the process of onboarding new customers with the requisite information, which has been verified and checked becomes much quicker.

Controls and checks

BaaS also offers corporates with a platform to track and control the expenses they make on a regular basis.  Furthermore, BaaS also offers data and insights into payment and collection patterns to help you plan better. You can put controls and checks at various levels to ensure spend is warranted and as planned.

What is more, BaaS helps financial services to be delivered to the end user at a lesser cost, enables quicker launches, and improve the customer experience on the whole. The advancements in BaaS has helped a wider audience get access to financial services. Given the rising number of startups, smaller and medium businesses in our growing economy, it is critical for all businesses to have access to banking services and BaaS does just that.

Moreover, today a country like ours wants to move away from the paper-bound and physical aspect of banking and financial services to a virtual experience. BaaS has a huge role to play in this aspect by not only ensuring speed and accessibility but also ensuring security at every level.

Categories
Payables

The Role of Vendor Payments in Customer Experience

Role of vendor payments

If you are a startup, small or medium-sized business, then your main concern is ensuring that you continue to serve your customers seamlessly. As simple as it sounds, serving customers seamlessly takes a lot of effort and can require you to plan well and ensure that all aspects of your business are running smoothly.

In this article, we will deep-dive into vendor payments and how they can affect customer experience. The question that may come into your mind is how vendor payments affect customer experience. Vendor payments definitely affect your cash flow and the rates you are able to get from vendors, but customer experience? Though this seems farfetched, vendor payments have a profound impact on customer experience.

Customer experience and vendor payment; what is the connection?

Let’s identify the factors that connect these two seemingly disparate aspects by defining what they mean and then connecting the dots.

Vendor payments are related to the purchases you make to run your business, in the form of supplies or services. It can include anything from the raw materials for the production of your product to stationery to keep your office running or even the cleaning services for your premises.

The process for onboarding vendors is handled by the procurement team which gets a request to start the process from one of the departments. They then get the quotations, evaluate vendors, negotiate terms for payment, and credit period, and then issue a purchase order (PO) that has these details.

The vendor after delivering the goods or services raises an invoice requesting payment as per the credit terms.  Once it is confirmed that the goods or services have been delivered as agreed upon, the finance team releases the payment. The process repeats and continues as required.

Customer experience is a continuous process that ensures that the customer has a positive journey throughout the purchase process. This starts right from the first touchpoint, which can be via social media or the website, and continues through the entire process of learning about the product, understanding the pricing, making the purchase, remitting payment, getting delivery, and keeps going on with the after-sales services. Ensuring that the customer experience is seamless at all levels not only maximizes customer lifetime value but also ensures business continuity.

How vendor payments affect the customer experience

Supply continuity

Often, the relationship that your customers have with you is not a once-and-done kind of deal and can involve the continuous purchase of goods or services. When you do not streamline vendor payments, you often find that there is a problem in the continuous delivery of goods and services on time to the customer. And when you have a long-term relationship with the customer, it is important to be able to ensure continuity in the delivery of goods and services as per your contract with the customer.

Quality of goods

Vendors or suppliers and the quality of supplies or services they provide to you have a direct impact on the quality of goods that you deliver to your customers. When you do not pay your vendors on time, then it is likely that you stop being a priority customer to your vendors. This, in turn, will affect the quality of supplies adversely. Without quality supplies, the goods or services you supply to your customers are also going to be adversely affected.

Product pricing

Vendors give priority to buyers who pay them good rates and pay them on time. Any delays in vendor payments have a cascading effect on the pricing that the vendor offers you. Delayed payment to vendors affects their cash flows, which in turn means an increase in opportunity costs, and this results in an increase in the pricing of supplies to you. This, in turn, will increase the pricing of the products or services deliver to your customers. A frequent rise in prices without incremental value is bound to have a negative impact on the customer experience.

After-sales service

The ability to continue providing services or spare parts or for that any aspect of after-sales service depends on having the right resources to do so. And the right resources, especially in terms of supplies, spare parts, etc. will depend on continued supply from your vendors, which can be affected when you do not pay vendors on time.

Surprising ways vendor payments affect customer experience

As a smaller business wanting to make its mark in this competitive market, the key factor to keep in mind is providing a seamless customer experience. And in today’s world, the customer experience is not limited to the actual purchase process but includes all the touch points where the customer touches base with your business.

Categories
Expenses

What Are Non-operating Expenses and What Is Their Impact?

What are Non-Operating Expenses

Expenses are the one word that every finance team member is aware of and often views them as the enemy that needs to be controlled.  And for startups, expense management is a huge aspect of not only profit margins but continued operations and even reputation management to a certain extent. However, as we know that not all expenses are the same.

In a typical business, you have operating expenses that have an effect on the operations of the company. These include direct expenses like raw materials and other supplies. Then there are the indirect expenses or overheads like rent, utilities, taxes, subscription costs, etc. In this article, we will not be looking at any of these expense categories but we will look at non-operating expenses. While these are not regular payments that mostly may not occur all the time, it has an effect on the cash flow among other aspects.

How do non-operating expenses affect your business?

Cost of finance: In other words, the interest you pay on the finance you arrange comes under the category of non-operating expenses. However, this is one of those payments that need to be paid on a regular basis until the loan has been completely paid off and will need to be considered for cash flow planning.

Expenses related to restructuring: In many companies, restructuring the teams and the way they operate is the norm and in others, it happens due to the circumstances. These expenses could include changes in salaries, incentives, and severance pay if any.

Settlement of lawsuits: While legal fees that you pay to your legal counsel comes under operating expenses, one-time settlements for lawsuits do not. These are considered non-operating expenses and will be classified as such.

Difference in currencies: When a business deals with multiple currencies across the globe, this can happen. Usually, the pricing of the project is based on the currency value at the time of planning with a bit of factoring for fluctuations. However, when there are major fluctuations, these can be considered non-operating expenses.

Force Majeure losses: Losses that occur due to disasters or causes beyond control are often compensated through insurance. However, the company may have losses on some assets that are not insured and these will come under the non-operating expense category.

Inventory write-off: Companies spend a lot of effort and time on planning their inventory levels. However, there can be circumstances where the stocks are sold for lesser prices or wasted in some manner. Once again, the expenses incurred due to this will be considered non-operating costs.

Account method changes: Companies are known to change their method of accounting due to many factors. When this happens, there could be extra costs involved, which will not be part of operating expenses as they are a one-off and not related to the core business.

From a purely financial perspective, it is important to recognize which expenses fall under the category of non-operating expenses and add them to the right place on your financial statement. There are many reasons to do these and some are given below.

Financial clarity: When a financial institution looks at your financial statements, they look at revenue and expenses to determine the loan amount and terms of the loan. Clear entry of non-operating expenses showcases the ability of your business to meet loan repayments.

Stakeholder transparency: As a business, you have many stakeholders who rely on the financial data you provide to make informed decisions. With the clear marking of operating and non-operating expenses, you can provide them with the clarity they require.

Cash flow planning: At the core of any financial planning is the determination of how much funds the business is going to need for a particular time period. With clear demarcation and categorization of expenses, you can plan your cash flow with ease.

At EnKash, we believe that good financial planning starts with excellent spend management and as Asia’s 1st and smartest spend management platform, we enable our customers to manage their finances well.

Categories
Payables

Leverage Accounts Payable Insights to Make Smart Business Decisions

Accounts payable insights

If you ask a business leader what the main currency of their business is, the answer is most likely to be data. Yes, updated and accurate data is the currency that oils the business decision-making machine and keeps it running. Any smart business leader will vouch for the importance of updated data to make informed decisions.

While data comes from numerous sources, the aim of a business leader is to focus on those aspects that affect customers, which is why finance data is vital. Finance, especially, cash flow-related data need to be updated, accurate, and action-oriented. Data related to cash flow can be related to accounts payable (payments to vendors and suppliers) and accounts receivable (collections from customers or buyers).

In this article, we will explore how accounts payable data can help with smart business decision-making.

What is accounts payable?

Accounts payable is the amount a business owes a supplier or vendor when they purchase goods or avail services on credit. In most cases, the credit period is short and the payments have to be made within the stipulated time to avoid penalties and ensure a continued supply of goods or services.

Depending on the nature of the purchase, the cycle continues as per the agreement terms and conditions.

Steps involved in accounts payable

Procurement stage data: This data is critical to ensure that the quality requirements of raw materials or services are detailed. Doing this ensures that the quality of output that your business provides to customers is maintained.

Request for quotes: Data from this stage is directly used in the costing of your products or services. In a competitive market, it is essential that you price your products or services right. The pricing should cover all the costs that you incur and have a profit margin but also be attractive enough for customers to continue buying from your business.

Vendor or supplier evaluation: The criteria you set for vendor or supplier evaluation is vital as it evaluates the vendor’s quality as well as the price. Many businesses also consider the reputation of the vendor and other factors like ESG to evaluate a vendor or supplier. Data from this stage helps you establish your business as a quality-conscious entity from every angle.

Negotiation and finalization: Data from this stage of the AP cycle establishes that you are a confident business that believes in getting the best at a reasonable price. Also, price negotiations are important to the cost of your products and services.

Contract-related information: You need to keep tabs on the contract and related information to ensure the continuity of your business. Contract information ensures that you renew the contract on time so that you can continue to provide quality services or products to your customers without interruption.

Delivery and invoice: The data at this stage helps you understand the quality, quantity, and timing aspects. This, in turn, helps you determine your ability to meet customer demands and business continuity.

Payment request and completion: The information at this stage is crucial to determine how much cash flow has to be arranged to meet payments. Paying vendors and suppliers on time helps you with continuity, negotiation power, and fund planning. Your team can negotiate terms to ensure that you get better rates, improved credit periods, and even add-ons if applicable.

As you can see, data from every stage of the accounts payable process can be leveraged to ensure the success of your business. Automation of this process along with real-time sync with your existing finance system will help you mine this data quickly and accurately.

At EnKash, we offer our customers fintech solutions that will enable them to optimize their financial processes. As Asia’s 1st and smartest spend management platform, EnKash helps you leverage technology to make smart, timely, and data-driven decisions.

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Cards

What does PCI DSS have to do with FinTech?

PCI DSS in fintech

The PCI DSS (Payment Card Industry Data Security Standard) was formed in the year 2004 by American Express, Discover Financial Services, MasterCard, Visa, and JCB international. The objective of these guidelines is to ensure certain compliance norms. The key is to ensure that credit and debit card transactions are secured against theft and fraud.

Even though PCI DSS does not have the legal authority to compel the compliance aspect, it has become a necessity for any business that processes card transactions. The obvious inference from the above is that fintech, which is a culmination of finance and technology, will have a lot to do with being PCI DSS compliant.

In this article, we will look at the measures required for a business to remain PCI DSS-compliant along with the relevance of PCI DSS compliance to the fintech sector.

Fintech and PCI DSS; The Connection

Today’s financial services require not only numerous options, convenience, simplicity, and accessibility but also security. Fintech enables finance and finance operations to move from the physical realm to the virtual world. Here are some leading examples of where technology has transformed finance.

Payments: In today’s world, fintech has met the need for immediacy when it comes to payments and businesses tend to make payments with a few clicks either on their laptops or on their phones.

Virtual accounts: Another aspect that technology has touched positively is that of bank accounts that are virtually accessible. No longer do you see the finance team making multiple visits to their bank.

Card transactions: The use of cards for personal as well as business transactions is on  the rise and this is not only because of the acceptance and convenience but also because technology offers layers of security that add to our confidence.

Collections: Fintech has a role to play in collections not only with timely reminders and invoices on the go but also with a plethora of options that make it easy to make payments.

Audits: When we talk about finance, audits cannot be far behind. Fintech has helped in this aspect as well with the creation of virtual approval flows and real-time documentation in a matter of seconds.

Reconciliation: When a business makes numerous payments and collects from many accounts, then it is likely that bank reconciliation becomes a huge task. However, technology helps in this aspect as well with automatic matching and reconciliation.

As you can see from the above instances, fintech is instrumental in easing many processes and operations in finance. And when you move finance from the physical world to the virtual world, then security is a real concern, which is where PCI DSS comes into place.

How to become PCI DSS compliant?

PCI DSS sets forth some operational and technical guidelines with a focus on ensuring that the cardholder’s data is kept safe.

How to become PCI DSS Compliant
How to become PCI DSS Compliant

Here are the 12 steps to comply with PCI DSS:

  1. Protect cardholder data with the installation and constant maintenance of a firewall configuration
  2. Change the defaults supplied by vendors for the security parameters and passwords
  3. Always ensure that cardholder data is protected
  4. Ensure that the cardholder’s data is encrypted across networks
  5. Keep updating antivirus software and programs
  6. Make sure that you develop and maintain secure systems and applications
  7. Limit cardholder data access strictly on the basis of a business requirement to know
  8. Make certain that each person with computer access has a unique ID
  9. Ensure that cardholder data’s physical access is restricted
  10. Keep track of and monitor access to cardholder information and network resources
  11. Constantly test your security systems and processes to identify and address any gaps Create and update a policy that will help your team to maintain information security

There can be severe consequences for not meeting PCI DSS requirements. Not only will it interrupt operations but also increase costs associated with operations, compliance, and risk management.

As an offering, a host of solutions related to spend management, EnKash is not only PCI DSS compliant but also SOC2 compliant.