With the rise of modernization and industrialization, small businesses and companies started to compete to achieve two goals of Wealth Maximization and good Cash Liquidity positions for themselves. That’s all they are working for to increase their organization’s value and financial stability to pay off all their liabilities. And for that, they have to maintain both a healthy cash inflow and cash outflow system. To manage their cash inflows, they can rely on the Sundry Debtors Management process. But for their cash outflow issue, they have to maintain their Cash Purchases and Cash Payments to Sundry Creditors. A large amount of leakages happens from the payments sent to creditors. So managing the payments to creditors task becomes difficult for businesses. That’s why the Sundry Creditors Management process comes into place.
So if you have come here to read this article, you want to know about the Sundry Creditors Management process. And there’s some possibility that you might have some background to it. But in this guide, we will tell you about the whole thing right from Beginning to end for all our readers. So let’s get begin with it.
What are Sundry Creditors?
The individuals or small businesses or firms or companies who receive any products or services from any business organization without immediate payment but on a credit basis are known as Sundry Creditors for that particular business organization. They are getting credit on the security of a promise or agreement to businesses to pay off their liabilities in the future. It is a collective name or account type given to all the lenders and trade creditors.
Let’s take a quick example. ABC Co. Ltd. supplies some quantity of Raw Materials to XYZ Co. Ltd. on a credit basis for 15 days. And this transaction was pre-approved by both parties on set terms and conditions. Now for XYZ Co. Ltd., his supplier stand as Trade Creditor and contributes to other current liabilities. Along these lines, when XYZ Co. Ltd. gets more credit supplies from its suppliers, then collectively, they all are known as Sundry Creditors.
What is Sundry Creditors Management?
Sundry Creditors Management is a technique of efficiently handling the companies’ unpaid claims to third-party vendors over credit purchases. It helps in managing the vast range of payments and processes plenty of invoices. And this timely management of cash outflow in the form of payments to creditors helps maintain a healthy working capital situation in the organization.
Why is it Important & Needed?
The concept about Sundry Creditors and their management process, which’s explained above, may have given you some idea about it. Now let’s understand why it is necessary and needs to get implemented.
1. Sustaining a proper Cash Flow system –
Through the Sundry Creditors Management process, management of the cash flow system in the organization becomes easy. It helps in providing creditors with their payments after optimally exhausting the supplier’s credit facilities. With the use of this facility, cash outflows get streamline with the credit period utilizing the money accordingly.
2. Tracking Sundry Creditor’s dues –
With the large number of processes occurring in the company, it gets challenging to focus on just one thing. So to go on through each invoice to know about the payment details towards creditors becomes extremely difficult. And to help companies out with that, they need to record each invoice with all its terms and conditions, and then only the tracking of their payments is possible. So this process can become easy and efficient with the use of Sundry Creditor’s Management process. Because it helps to determine the exact amounts owed to creditors, avoid overdue charges, penalty or late fees due to delay in payments.
3. Maintaining good relations with Suppliers –
The suppliers are the essential stakeholders for any organization as they help out in primary needs of inputs for our products. So it becomes necessary to maintain good relations with them. And this is done by providing timely payments for their goods and services. So then only suppliers will supply the continuous flow of goods and services and offer other facilities like trade discounts and credits limits necessary for operating the company.
4. Formulating Cash management policies –
So as you all know, the importance of a cash flow system in an organization is necessary to make plans to manage it efficiently. And to help in this, sundry creditors management provides information about the time to time expenses and liabilities. Accordingly, companies can formulate plans for short and long periods as to how to pay it off.
How to Implement Sundry Creditors Management?
After understanding sundry creditors and their management, why it is necessary, you all will want to know about its implementation. So let’s start with it.
There are two approaches that businesses can use to implement a sundry debtors management process. First is the Traditional or Manual Approach, in which companies early perform the whole process manually by appointing different employees. And the collection of data and preparation of reports for the management’s understanding, whole thing done on paper.
The second approach is using automation software that has the features of performing sundry creditors management. It will help to provide real-time information about the dues, further refraining from any fraud and theft in the business. Because it helps to store all contracts and related documents in one place, monitoring overdue and providing automated reminders.
Read More about – Sundry Debtors Management in SME Business – Ultimate Guide
After providing you all information about sundry creditors and their management, I must guide you on selecting the different approach for its implementation. So if the businesses, whether small or large, go for the manual process, they will face difficulties in managing and providing the correct information. Also, the process will take a lot of time to complete. And in some cases, a simple graphical depiction of the complete data will not be possible.
So with these all difficulties the second approach is the more suitable option. The use of the software will make it easy and fast for the users to view the data in a much simpler manner. And for that firms, can choose different software solutions available in the market. But should not go for software that only provides for just this particular need. Further, they shall go for a solution that satisfies all their needs and fits their company’s size and nature of business. And TranZact is one such option that is suitable for SMEs.
TranZact is a digital transformation tool and platform for SMEs to digitize business processes right, from customer inquiry to dispatch. It helps in digitizing the core business activities, which also involves the sundry creditor management process. It provides BI Dashboards, which tell about the position of cashflows, total balances of creditors, and other reports. That further helps the users to make data-driven efficient decisions for their business. So firms should choose this software or any other software only if they provide for their nature and size. Otherwise, go for other solutions available in the market if it suits them.