Author: Jay Savla

Vendor Ledger Reconciliation: A Key to Better Procurement

In the world of finance and accounting, there’s a critical process that brings clarity to chaos, harmony to discrepancies, and balance to the books- it’s called reconciliation. One paramount part of the overall reconciliation process is Vendor Ledger Reconciliation. The vendor ledger reconciliation process ensures accuracy and transparency in the accounts payable function of an organization.

Definition
Vendor ledger reconciliation refers to the process of comparing and matching vendor ledgers or vendor statements of accounts with internal records to identify and resolve any discrepancies or inconsistencies. This crucial reconciliation process not only benefits the finance team but also extends its advantages to the entire procurement department.

Benefits of vendor ledger reconciliation for the purchase department of your organization

  • Strengthened vendor relations

A well-reconciled vendor ledger also paves the way for improved vendor relations. All vendors prefer to receive timely payments accompanied by clear and reconciled invoices. Imagine you are buying parts for gadgets and the bill you get is not the same as what you agreed on. Reconciling the records carefully helps find and fix these differences. Plus, when you are good at keeping track of your purchases and paying on time, the people you buy from like you more. This can get you cool perks like bigger discounts, being a priority customer, and even getting special deals.

  • Preventing Overpayments and Duplicate Payments

Duplicate payments and overpayments can occur in large organizations with numerous transactions. Vendor reconciliation helps the purchase team identify such instances and claim refunds or correct the errors, leading to cost savings.

  • Data-driven price comparison

An effective comparison of quoted prices with invoiced amounts, helping the purchase department identify overcharges, undercharges, or pricing inconsistencies. Proper reconciliation guarantees that procurement decisions are based on accurate data, fostering better vendor relationships and optimizing cost management strategies.

  • Access to Extended Credit Days and Discounts

Accurate reconciliation of vendor invoices instills confidence in the reliability of the purchase team’s payment processes. Vendors, reassured of timely payments and efficient financial management, may offer extended credit days to the organization. Additionally, they might even be more inclined to extend early payment discounts as a gesture of appreciation for the smooth and prompt payment process.

  • Mitigated Purchasing Risks

Vendor ledger reconciliation mitigates the risk of financial errors and fraud in the procurement process. The purchase team can identify and address discrepancies, unauthorized charges, or potentially fraudulent activities. Thus, ensuring that all transactions are legitimate and accurate. This safeguards the organization from financial losses and reputational damage caused by discrepancies in vendor transactions.

Vendor ledger reconciliation is a crucial activity that offers numerous benefits to the purchase team. It contributes to better financial management, vendor relationships, and overall operational efficiency. By maintaining accurate and up-to-date records, the purchase team can make well-informed decisions and reduce financial risks.

Adopt the new-age approach for vendor ledger reconciliation with Firmway’s cutting-edge reconciliation.

With its advanced automation and data matching capabilities, the software helps identify discrepancies, prevent overpayments, and improve accuracy in financial records. It provides updates like unbooked debit note/credit note, tax discrepancies, duplicate payments, and more. This enhances vendor relationships, achieve audit readiness, and optimize their procurement process for better financial management.

Digital Transformation

CFOs: Architects of Digital Transformation – How They’re Driving Growth in the Digital Age

From Finance Chiefs to Digital Catalysts: A Look at the Evolving Role of CFOs

The past few years have witnessed a technological revolution, with advancements in artificial intelligence, block chain, robotics, and automation nudging businesses towards digital transformation. It was the Covid-19 pandemic, however, that truly served as a catalyst, propelling companies to embrace digital initiatives like never before. 85% of CFOs plan to increase their investment in the cloud according to Accenture, and Gartner reports that 78% will maintain or increase their digital investment through 2023.

Leading the Charge: CFOs at the Forefront of Digital Strategy

In this digital landscape, C-level executives play a crucial role in successfully planning and implementing transformation strategies. Among these, CFOs find themselves at the forefront of the journey. BDO’s report, ‘Do CFOs Play a Leading Role in Digitally Transforming their SMEs?’ reveals that 76% of CFOs are involved in setting the overall digital strategy for their organizations.

Beyond Finance: Architects of Transformation Across the Organization

The CFO’s role goes beyond simply implementing new technologies in the finance department. They are, in many ways, the architects of digital transformation across the entire organization. As the numbers speak for themselves:

  • Digital Ambassadors: Bridging the Gap between Finance and Other Departments: 68% of CFOs provide suggestions to implement digital ideas for faster services and growth in other departments. They act as digital ambassadors, bridging the gap between finance and the rest of the organization.
  • Driving Enterprise Value Creation: CFOs are propelling Enterprise value creation to the forefront of strategic CEO agendas. They understand the transformative power of technology and are driving its adoption for maximum impact.

Transforming the Finance Department: From Back Office to Data Powerhouse

This focus on value creation manifests in the finance department itself, which is undergoing a digital revolution. Large-scale companies are increasingly adopting automation tools for accounting and data management, streamlining processes and unlocking new insights.

Meeting Evolving Expectations: Delivering Real-Time Data for Informed Decisions

But technology isn’t just about streamlining the back office. As CEO and board member expectations shift, demanding real-time, electronically formatted data for review, CFOs need to ensure their organizations can deliver. This necessitates transforming accounting, cash flow, and auditing with data visualization, advanced analytics, and real-time reporting features.

Embracing Automation: Optimizing Operations for the Digital Age

Ultimately, gathering, organizing, and accounting for data remains a core task of managing finances. However, digital transformation opens doors to new opportunities and expands the scope of business operations. Companies can now operate across borders, catering to a larger market, resulting in a higher volume of transactions that traditional manual methods simply can’t handle. According to McKinsey Global Institute, a staggering 77% of general accounting practices have high automatability potential.

The CFO Advantage: A 7% Boost to Transformation Success

Undeniably, a company’s digital transformation success hinges on various factors like vision, organizational structure, and employee skillsets. But a CFO’s involvement in the process is a significant differentiator. Studies show that companies with CFOs actively involved in digital transformation experience a 7% higher chance of success. This is a testament to the transformative power of CFOs, who are evolving from finance leaders to catalysts for innovation and digitization in their organizations.

Conclusion: The Future Belongs to the Digitally Equipped

The future belongs to those who embrace technology and utilize it to unlock new possibilities. And in this digital age, CFOs are playing a critical role in equipping companies with the tools and strategies they need to thrive. By stepping beyond their traditional roles and becoming digital architects, CFOs are leading their organizations towards a brighter, more efficient future.

Mastering 26AS Reconciliation

Mastering 26AS Reconciliation: Proven Ways to make it a Breeze

Understanding the Need for Mastering 26AS Reconciliation

In recent years tax regulations have undergone humongous change. Many of these are being done with the intention of ensuring that all the transactions are duly reported to the Income Tax. Mastering 26AS Reconciliation amidst these evolving regulations.

Department (IT Department). With the help of this information, the IT Department will be able to analyze and catch hold of tax evaders.

Decoding Section 194Q: Mastering 26AS Reconciliation Amidst TDS On Goods

One such change is the introduction of Tax Deducted at Source (TDS) on the purchase of goods vide Section 194Q of the Income Tax Act (IT Act). The introduction of the same has resulted in flooding of the TDS entries in Form 26AS. It is a form which captures details of the TDS deducted and reported for a particular Taxpayer. Further, the IT Department relies on this form before allowing the TDS refund or adjustment of TDS against Income Tax liabilities. Therefore, it has indirectly become mandatory on the part of the Taxpayer to ensure that the Deductor has reported all the TDS in its Form 26AS. However, to identify the same one needs to first identify the Deductor who has not reported the same. Therefore, it has become necessary to reconcile Form 26AS.

However, Reconcile with what other data source?? There are two options 1) TDS ledger and 2) Sales Register. Let’s try to understand how each of these ways works and which one to select for your organization.

1) 26AS v/s TDS Ledger (Approach 1)

In this way, Form 26AS of Taxpayer is reconciled with the TDS receivable ledger maintained by the Taxpayer. This is a direct approach where we are comparing two different data sets capturing the same information.

2) 26AS v/s Sales Register (Approach 2)

In this way, Form 26AS is compared with what TDS should have been deducted for each and every sales line item. Assuming that the Tax Deductor has diligently deducted the TDS, this is an indirect way.

Both approaches have their benefits and drawbacks, so organizations should choose the one that best suits their needs. Below are the areas which one should consider before choosing the approach:

A) Timing of booking of TDS receivable

Most organizations book TDS Receivable at the time of payment receipt. So while doing reconciliation there will also be a date mismatch and in the scenario where there are ‘000s of line items, this becomes difficult to handle when we are opting for Approach 1. However, if linking of payment with invoice is available then Approach 1 can become very easy to implement.

If the organization books TDS Receivable on an ad hoc basis, it shall opt for Approach 2, provided all the other details are available.

B) Reporting pattern of Tax Deductor

Are the Tax Deductor reporting on the basis of the actual date or are they either putting the date of the end of the month or the end of the quarter? Accordingly, one shall select the approach of reconciliation. If the Tax Deductor is clubbing the amount for the quarter or month and just reporting a single line item then in that case just a TAN level month-wise or quarter-wise reconciliation will suffice.

C) Availability of TDS rate for each sales line item

Approach 2 is possible only when one has proper records of the TDS rate applicable on each sales invoice or each line item of the sales invoice. In many cases, when billing services and goods in a single invoice, each line item of the invoice will have a different TDS rate.

Hence, it is crucial to exercise precision when choosing an approach. Selecting the wrong method can elongate the activity and potentially result in repetition.

Future-Proofing Your Finances: Mastering 26AS Reconciliation for Long-Term Compliance

Organizations can also evaluate various software which are available to automate 26AS reconciliation. One such solution is provided by Firmway. Firmway’s 26AS reconciliation software provides both the approach as mentioned above. Moreover, it also provides the option of line level as well as TAN level reconciliation. To know more about Firmway’s 26AS Reconciliation Click here.

Modern CFO

Modern CFO: The Changing Role and What You Need to Know

What Are The Roles and Responsibilities of Modern CFO ?

The changing dynamics of business pose newer challenges and CFOs now need to be more vigorous, effectual and adaptable. The Modern CFO need to have more than just technical knowledge. The roles and responsibilities of CFOs has changed from being just technical and finance experts to being a partner in the organization’s growth and prosperity. They can be the catalyst of growth and holds the power to change the entire trajectory of the organization. However, in essence, what is expected of the modern-day CFOs? Let’s find out!

Key Roles & Responsibilities of Modern CFO

Following are some of the modern day CFO roles and responsibilities that have become essential for any organization:

  • Leveraging Technologies: Technology is essential for an organization’s survival, and failing to embrace it can doom the organization. Modern-day CFOs must monitor technological changes and determine how to evolve the organization with the latest technologies.
  • Identifying Opportunities: As the business grows, more and more opportunities knock on the doors. By identifying the latest trends, networking, collaborating, encouraging innovations and adopting a proactive approach, CFOs can grasp the opportunities for overall growth and expansion.
  • Risk Management: An organization faces multiple risks whether it’s from the environment, competitors or governmental policies. Now, the roles and responsibilities of CFOs also include the need to identify and assess major risks that are a threat to the organization and develop risk mitigation strategies. Further, CFO should also monitor the effectiveness of these strategies and keep track of the risk profile of the organization.
  • Quality Decision-Making: Decision-making is one of the most important skills for any leader. At the top management level, the decisions that leaders make decide the fate of the organisation. Modern-day CFOs need to gather and analyze data and derive meaningful conclusions before making any decision.
  • Managing Team: This begins right from building the team and training to equip them with the necessary skills and knowledge. CFOs play a key role in managing the finance team of the organisation. They establish goals, set directions and provide necessary guidance to the team to achieve their objectives. Further, they provide necessary feedback and support to ensure the growth of the team.

Modern CFO : In a Nutshell

Modern-day CFOs are expected to deliver more than just their finance roles. While expected to curate strategies and make informed financial decisions, CFOs have transformed their roles and responsibilities to be more inclusive towards the organization’s management. Thus, it is important for individuals to equip themselves with the necessary knowledge, understanding and experience to deliver maximum value to the organization.

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