Vendor payments · for finance teams
From approved invoice to paid supplier
Paying a supplier is the easy part. Paying the right account, the right amount, on the right day, with a record both sides agree on, is where accounts payable earns its keep. This guide covers the controls around the payment, not just the transfer.
1 · Invoice in
- Kaveri Packaging
- INV-2291 · ₹1,18,000
- Due 30 Sep · net 30
2 · Match
- Purchase order matches
- Goods received
- Bank details changed 2 days ago, by email
3 · Held, then cleared
- Called the supplier on the number already on file
- New account verified in their name
4 · Approve
- Above ₹1 lakh: two approvers
5 · Paid and explained
- NEFT on the due date
- Bank reference saved
- Remittance advice sent
Payment is the last step of a longer chain
Accounts payable runs from the moment you agree to buy something to the moment the supplier's books show you've paid. Mistakes made early in that chain surface at payment time, which is why a vendor payment is safest when the steps before it are clean.
- 01Order
- 02Receive
- 03Invoice
- 04Match
- 05Approve
- 06Pay
- 07Advise
- 08Reconcile
This guide covers the highlighted four. “Match” usually means checking the invoice against the order and the goods received.
For accounts payable
One supplier master, one source of bank details
Every supplier you pay should exist once, in one list, with bank details that were checked when they were added. Payments are made to that record, never to details typed from an invoice or an email. An invoice that shows different bank details from the master isn't a payment instruction; it's a question to ask the supplier.
When a supplier is added, three checks cover most of the risk: that the business is who it says it is, that its tax registration is real and active, and that the bank account belongs to it.
Who is this business?
Registration, directors, address
Is its GSTIN real and active?
Status and legal name behind the number
Does the account belong to it?
Account exists, is active, and the name fits
For approvers
The most expensive email in finance
It arrives from what looks like a supplier's address, often in a thread you recognise: “We've changed banks. Please use the account below for all future payments.” Sometimes the supplier's own mailbox has been taken over; sometimes the address differs by one letter. The invoice is real, the amount is right, and the payment goes to a fraudster.
No payment system can tell that an instruction is fraudulent if you asked it to pay that account. The defence is a process, applied every time, that confirms the change through a channel the fraudster doesn't control.
- 01
Stop. Treat any change of bank details as unconfirmed, however routine it looks.
- 02
Call back. Phone the supplier on a number already in your master, not one given in the request.
- 03
Verify. Check the new account exists and is in the supplier's name before saving it.
- 04
Two people. The person who enters the change isn't the one who approves it.
- 05
Cool off. Don't pay a new account in the same run it was added; watch the first payment.
An approval matrix that matches the risk
Not every payment needs the CFO. A matrix decides, in advance, who approves what, so urgent payments aren't waved through and routine ones don't wait. The thresholds below are an example; set yours to your size and risk. Which approval rules can be configured on Peneu, and which stay in your own workflow, is confirmed during onboarding.
| Payment | Approved by | Extra check |
|---|---|---|
| Known supplier, up to ₹1 lakh, matched invoice | AP lead | None beyond the invoice match |
| Known supplier, above ₹1 lakh | AP lead and finance manager | Invoice match and budget owner sign-off |
| Any payment to a new or changed account | Finance manager | Call-back confirmation and account verification |
| Advance payment with no invoice yet | Finance manager and budget owner | Contract or purchase order on file |
| Urgent, outside the payment run | Finance manager | A written reason; reviewed at month end |
Illustrative thresholds. Amounts and roles are an example, not a recommendation for your business.
When to pay: runs, terms and due dates
Most finance teams pay in scheduled runs, often weekly. Invoices falling due before the next run are approved and paid together, which makes funding predictable and reconciliation a single job instead of a daily one. A run is usually sent as a batch; the mechanics are in the bulk payout guide.
Paying on the due date keeps cash in your business longest without damaging the relationship. Paying early can be worth it when the supplier offers a discount for it, or when a small supplier depends on quick payment. Paying late costs goodwill, and for some suppliers it can have legal and tax consequences.
India has specific rules on how quickly registered micro and small enterprises must be paid, and on the tax treatment of payments made late. What applies to your purchases is a legal and tax question; check it with your adviser before setting your payment terms.
| Payment | Usually goes on | Why |
|---|---|---|
| Routine invoice, paid in a run | NEFT | Runs in half-hourly batches, any day; no RBI minimum or maximum |
| ₹2 lakh or more, value-critical | RTGS | Credited within about 30 minutes; ₹2 lakh minimum |
| Urgent, small supplier | IMPS | Seconds, any hour, within NPCI and bank limits |
| Supplier who prefers UPI | UPI | Seconds, any hour, within NPCI and bank limits |
NEFT and RTGS details are from RBI's FAQs. Which rails are live on your account is confirmed during onboarding; see the payouts guide for how rails differ.
Remittance advice: explain every payment
A payment on a bank statement says only who paid and how much. A supplier with forty open invoices from you can't tell which ones a ₹3,47,000 credit settles, or why it's ₹3,000 short. The remittance advice answers both questions.
Send it on the day of payment, to the supplier's accounts contact, with the bank reference included. It turns “have you paid us?” calls into nothing. Whether Peneu sends remittance advice for you, or you send it from your accounting system, is confirmed during onboarding.
Remittance advice
IllustrativeTo: Kaveri Packaging, accounts · Paid 30 Sep · NEFT · UTR N2730…
| Item | ₹ |
|---|---|
| INV-2291 | 1,18,000.00 |
| INV-2307 | 2,36,000.00 |
| Less debit note DN-118 (damaged cartons) | −4,000.00 |
| Less tax deducted at source, where applicable | −3,000.00 |
| Net paid | 3,47,000.00 |
For controllers
Gross invoice, net payment
The amount you pay a supplier is often not the invoice total. Every difference should have a document behind it, and the supplier should see it on the remittance advice. The common ones:
Tax deducted at source
Where the law requires it, you withhold part of the payment and deposit it with the tax authorities for the supplier's account. Which payments it applies to and at what rate is a tax question for your adviser.
Debit notes
For short supply, damage, returns or price differences agreed with the supplier.
Advances
Money already paid before the invoice, adjusted against it.
Retention
Part of a payment held back under the contract until work is accepted.
When a supplier payment fails or comes back
| What happened | What it usually means | What to do | Tell the supplier |
|---|---|---|---|
| Rejected: invalid account | Details in your master are wrong or outdated | Get new details and confirm them like any bank change | Their details on file didn't work; ask them to confirm |
| Rejected: account closed | Supplier moved banks and didn't tell you, or told someone by email | Same as above: call back, verify, then pay | Ask for the new account through a verified channel |
| Returned after it was sent | Receiving bank couldn't credit it | Money comes back; re-pay once the account is confirmed | Payment bounced back; you'll pay again once details are confirmed |
| Pending for longer than usual | A bank hasn't confirmed yet | Check status; don't pay the invoice again | Payment is in progress; share the reference once confirmed |
A failed payment is a common moment for a fraudster to send “new” details. Apply the call-back check here too.
Closing the loop: invoices, payments and the ledger
Supplier reconciliation isn't about matching one payment to one bank line. One payment can settle several invoices; one invoice can be paid in instalments; a deduction can leave a small balance open. The unit of reconciliation is the invoice.
Each month, compare your open-invoice list for a supplier with their statement of account. Differences almost always trace to one of four things: a payment they haven't applied, a deduction they don't recognise, an invoice you haven't received, or a credit note one side is missing. The remittance advice and the bank reference settle most of them in minutes.
Mark paid with the bank reference. Not just the date. The reference is the proof the supplier's bank will recognise.
Keep deductions on the invoice. So the remaining balance is explained, not just open.
Reconcile against their statement monthly. Differences are cheapest to fix while they're recent.
Is paying early ever worth it?
Some suppliers offer a discount for paying before the due date: “2% off if paid within 10 days, otherwise the full amount in 30”. It looks small. It isn't. Paying 20 days early to save 2% is like earning 2% on your money for 20 days, which works out to far more than most businesses earn on idle cash over a year.
The question to ask is simple: is the discount worth more than what that cash would do for you over the days you're giving up? If you'd otherwise borrow to cover the gap, compare it with your borrowing cost for the same period.
Paying early for a different reason, such as a small supplier who depends on quick payment, is a relationship decision, not a financial one. Make it deliberately, and record it as an exception to your payment run.
Worked example
Illustrative- Invoice
- ₹5,00,000, due in 30 days
- Offer
- 2% off if paid by day 10
- Saving
- ₹10,000 for paying 20 days early
- Return on the cash
- ₹10,000 on ₹4,90,000 for 20 days: about 2% for 20 days
- As a yearly rate
- Roughly 37% a year, simple, before tax
What to keep for every supplier payment
When an auditor, a tax officer or a supplier asks about a payment a year from now, the answer should take minutes. That depends on what you kept on the day. For each payment, keep these together and linked to the invoice:
- 01
The invoice and the order
What was bought, at what price, and that it was matched.
- 02
The approval
Who approved it, when, and under which rule of the matrix.
- 03
Any bank-detail change
The request, the call-back record, and who approved the change.
- 04
The payment record
Amount, date, rail and the bank reference (UTR).
- 05
The remittance advice
What you told the supplier, including deductions.
- 06
Deduction documents
Debit notes, and records of any tax withheld and deposited.
How long to keep them is set by tax and company law, and is a question for your adviser.
“We haven't received the payment”
It's the most common supplier call, and most of the time the money has arrived: it's been credited against a different invoice, or it's sitting unapplied because the supplier couldn't tell what it was for. A short, fixed routine settles it quickly and protects you from the call that ends with “please pay it again to this new account”.
- 1Check the payment's status. If it's pending, say so and give an expected time.
- 2If it's processed, send the date, amount and bank reference (UTR). Their bank can trace any credit from the reference.
- 3Resend the remittance advice so they can see which invoices it covered and why the amount differs from the invoice total.
- 4If they ask you to pay again, or to a different account, stop. That's a bank-detail change, and it goes through the call-back check.
How different businesses run supplier payments
Manufacturers and distributors
Many suppliers, large invoices and deductions for short or damaged supply. Invoice matching against goods received matters most.
D2C and e-commerce brands
Packaging, logistics, marketing and contract manufacturing, often paid weekly. Changed bank details are a frequent attack.
Healthcare providers
Pharmaceutical, equipment and service suppliers with contract terms and retention.
Real estate and construction
Contractors paid against certified work, with retention and advances adjusted on each bill.
Vendor payment questions
From finance teams setting up supplier payments.
What is the safest way to handle a supplier's request to change bank details?
Treat every change as suspicious until confirmed. Call the supplier on a phone number you already had on file, never one given in the request, verify the new account is in the supplier's name, and hold payments to the new account for a short cooling-off period with a second person approving the change.
Should vendor payments go out daily or in weekly payment runs?
Most finance teams use fixed payment runs, often weekly, with urgent exceptions approved separately. A run makes approval, funding and reconciliation predictable. Pay on or just before the due date unless an early-payment discount makes paying sooner worthwhile.
How do I pay several invoices from the same supplier?
Combine them into one payment if the supplier prefers it, and send a remittance advice that lists every invoice number, any deductions and the net total. Without that list, the supplier can't match your single payment to their open invoices and will chase you for amounts you've already paid.
What is a remittance advice?
A short note sent with or after a payment that explains it: which invoices it covers, the gross amount, any deductions such as tax withheld or debit notes, the net amount paid, the payment date and the bank reference. It saves the supplier's accounts team from guessing.
Why was the amount I paid less than the invoice?
Usually because of deductions: tax deducted at source where it applies, a debit note for short or damaged supply, or an advance already paid. Each deduction should appear on the remittance advice so the supplier can account for it.
What happens if a supplier payment fails?
The money doesn't leave, or comes back if it was returned. Read the reason: a closed or wrong account needs new details from the supplier, confirmed the same way as any bank-detail change, before you pay again. Don't pay the same invoice twice while an earlier payment is still pending.
Do I need to verify a supplier before paying them?
Verify the business and its bank account when you onboard it, and again whenever the bank details change. Business verification and GST checks confirm who you're dealing with; an account check confirms the money goes to them.
Can vendor payments connect to accounting software?
Many businesses export approved invoices from their accounting or ERP system as a payment file, then import the results back to mark invoices paid. Which integrations and file formats Peneu supports is confirmed during onboarding.
A quick accounts-payable check
If you can answer yes to all six, your supplier payments are in good shape.
- 01Every supplier exists once, with bank details checked when they were added.
- 02Bank-detail changes are confirmed by a call to a known number, verified and approved by a second person.
- 03Who can approve what is written down, and payments follow it.
- 04Payments go out in scheduled runs; urgent ones have a recorded reason.
- 05Every payment has a remittance advice listing invoices, deductions and the bank reference.
- 06Supplier statements are reconciled at least monthly.
Set up supplier payments with Peneu
Tell us how you pay suppliers today, how many and how often. We'll walk through the flow, checks and records that fit.
Related
Official sources
Last reviewed . Examples, amounts and screens marked illustrative are not Peneu figures.