Jun 02
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Why is Accounts Payable Negative in The Cash Flow Statement when Accounts Payable Increased Year-over-Year?

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Accounts payable is a liability that expresses the amount a business owes to vendors and suppliers for goods and services received but not paid.  

  • When a company purchases goods or services on credit, it increases Accounts payable. When the AP debt is paid off, it decreases the pending account.  

Increased Accounts payable year-over-year means the company’s liability is increasing.  

However, if the company pays more than it accrued, the Accounts payable balance will be negative in the cash flow statement. The negative balance means the company has paid over the amount accrued. 

Therefore, a negative Accounts payable balance does not necessarily mean the payables balance has been reduced. Rather it indicates that the business paid off more than accrued.  

Such issues of overpayment indicate inefficient AP function in a company.  

Improving AP Management with Accounts Payable Outsourcing Services

Outsourcing to Improve AP Management Accounts Payable Outsourcing Service Providers can help companies achieve efficiency in accounts payable. Depending on your accounting outsourcing service needs, companies can outsource the entire accounts payables process or specific accounting processes such as invoice processing, accounts receivable, general ledger accounting, travel and entertainment expense accounting and bookkeeping. Account Payable automation with account payable outsourcing companies results in reduced errors, fraud prevention, and timely and accurate AP payments. Partnering with an account payable service provider for automation can streamline your processes and improve overall financial management.

How ARDEM’s Accounts Payable Outsourcing Services Can Help Address Negative Accounts Payable

ARDEM’s accounts payable outsourcing services offer comprehensive solutions to prevent and manage issues like negative accounts payable. Here’s how ARDEM can help:

  • Enhanced Accuracy: With ARDEM’s accounts payable automation, errors that lead to negative accounts payable are significantly reduced. Automation ensures accurate data entry and processing, minimizing the chances of overpayment.
  • Timely Payments: ARDEM’s accounts payable outsourcing services ensure that payments are made on time, reducing the risk of overpayments that can result in a negative accounts payable balance.
  • Comprehensive Invoice Management: ARDEM offers full invoice processing. This includes autonomous matching and verification. This helps prevent discrepancies that could lead to negative accounts payable.
  • Fraud Prevention: By automating the accounts payable process, ARDEM helps businesses implement strong internal controls. Thus, we reduce the risk of fraudulent payments and protect against negative accounts payable.
  • Real-Time Reporting: ARDEM provides real-time insights into your accounts payable, allowing businesses to monitor and manage their liabilities effectively. Thus, businesses can avoid any unexpected negative accounts payable situations.

By leveraging ARDEM’s accounts payable outsourcing services, companies can streamline their AP processes, prevent negative accounts payable, and improve overall financial efficiency. For more information, reach out to ARDEM.

Jun 02
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Why do companies need accounts payable?

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Accounts payable (AP) is a liability on a company’s balance sheet, representing how much the business owes to vendors or suppliers for goods or services purchased on credit.  

  • Companies need Accounts payable to keep track of debts to their vendors, suppliers, or creditors. 
  • With efficient Accounts payable management, companies ensure the processing of invoices on time and making payments accurately and timely to avoid late fees or penalties.
  • AP teams maintain sound relationships with their vendors by paying accurate and timely invoices.  
  • Companies can manage their cash flow by seeing what they owe. The accounts payable function provides crucial financial data for budgeting purposes.  
  • This department helps companies to identify their spending trends and make informed decisions for future purchases. 

Overall, Accounts payable is crucial for financial management. Most entrepreneurs think of delegating payables tasks to experienced outsourcing companies and benefit with: 

  • Leveraging the advanced technologies and expertise of the BPO company 
  • Reduced errors with RPA (Robotic Process Automation) 
  • Free to the resources from mundane tasks for better utilization 
  • Quick scaling up of Accounts payable teams with their growth 
  • Cost savings by implementing automated invoice processing significantly. 
  • Skilled Accounts payable teams can improve efficiency and enhance productivity 

Thus, approach an experienced accounts payable outsourcing service provider for efficient Accounts payable function.

Jun 02
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What are the roles and responsibilities of accounts payable?

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The key roles and responsibilities of the accounts payable (AP) function are as follows: 

  • Processing invoices: Accounts payable teams verify the invoices received from suppliers and vendors. They check for any errors in the information given on the invoice for appropriate payments and avoid disputes. Outsourced accounts payable services help to process invoices efficiently in less time as they have skilled personnel and advanced technology to automate the process. 
  • Reconciling statements: The Accounts payable team is responsible for reconciling vendor statements with the company’s records. It ensures that the team has received and processed the invoices accurately.  
  • Remit payments: Payables issues required payments to vendors on time that strengthen the relationship with vendors.  
  • Resolving discrepancies: Accounts Payables analyzes and resolves discrepancies if found between invoices and POs. It provides all support or documents to other departments also. 
  • Reporting: The team reports to the company on vendor payments, and outstanding invoices regularly. 
  • Vendor Management: Accounts payable team is responsible for effective vendor management. They look at their payment terms and mode to be compliant and avoid legal issues. Whenever the company receives an invoice from a new vendor, the AP team needs to enter the details in the system and maintain the new vendor’s records accurately.  

Enterprises can automate their Accounts payable processes by utilizing third-party outsourcing services that have skilled personnel. Accounts payable outsourcing companies ensure that the financial obligations in a business are met correctly and on time.

Jun 02
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Is accounts payable an expense or a liability?

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When managing business finances, one of the most common questions that arises is: “Is accounts payable an expense or a liability?” The confusion often comes from the fact that accounts payable (AP) involves money owed to vendors, which feels like an expense—but in accounting terms, the two are very different.

So, is accounts payable a liability? Is accounts payable a revenue or expense? In this blog, we’ll break down the difference between accounts payable, liability vs expense, and clear up these common misconceptions so you can better understand how AP impacts your company’s financial health. (Introduction ends here)

Accounts Payable – Liability vs Expense

An expense refers to a cost that has already been incurred for business operations. On the other hand, accounts payable (AP) refers to the money owed to suppliers/vendors for goods and services purchased on credit. Is accounts payable an expense?

The answer to this is that Accounts payable is not an expense.

Is Accounts Payable a Liability?

In a company’s balance sheet, accounts payable are recorded in the liabilities section as a current liability. Many people often ask, “Are accounts payable an expense?” The answer is no—accounts payable represent money the company owes, not an expense itself. However, when companies pay for invoices, the payment is recorded as an expense in their income statement. Similarly, some also wonder, “Is accounts payable a revenue or expense?” It is neither; accounts payable is a liability, while only the settlement of those payables affects the expense side of the income statement.

Let us say, ABC Enterprises purchases goods on credit worth Rs. 1 lakh from a vendor, the company’s Accounts Payable balance will increase by this amount as it is a purchase on credit and the amount is owed to the vendor. The enterprise has not yet incurred an expense. This often leads to one of the top queries people have: “Is accounts payable an expense or a liability?”

The correct answer is that accounts payable represents a liability, not an expense—this is a common point of confusion in the liability vs expense discussion. It will be considered an expense once the company pays off the amount and reduces the Accounts Payable balance by Rs. 1 lakh, at which point it shows up as an expense in the books. That’s why many also ask, “Is accounts payable an expense on the income statement?” The answer is no—it appears on the balance sheet as a liability until payment is made. These clarifications help address frequent impressions and questions around the position of accounts payable in financial statements.

Is Accounts Payable an Expense or Liability?

Accounts payable is a liability for a business, not an expense. Many people often ask, “Is accounts payable an expense or a liability?” In the liability vs expense discussion, the clear answer is that accounts payable is a liability, since it represents money owed to vendors rather than an immediate cost. To clarify further, “Is accounts payable an expense on the income statement?” The answer is no—it is recorded on the balance sheet as a liability until payment is made.

It is necessary to maintain the AP function efficiently for favorable cash flow and effective budgeting with a clear insight into payables. An experienced business process outsourcing (BPO) partner can help companies boost the efficiency and productivity of their AP function. They can offer high accuracy in invoice processing and data entry for better efficiency. Reach out to ARDEM for more information.

References:  

https://www.investopedia.com/ask/answers/030515/are-accounts-payable-expense.asp  

https://www.investopedia.com/terms/e/expense.asp#:~:text=An%20expense%20is%20a%20cost,revenue%20to%20arrive%20at%20profits. 

Jun 02
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Accounts Payable Process: Steps, Workflow, and Process Flow Explained

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    What Is the Accounts Payable Process?

    The accounts payable process is the step-by-step workflow businesses use to receive, verify, approve, and pay vendor invoices. The accounts payable process includes invoice receipt, invoice verification, coding, approval workflow, payment processing, and reconciliation. This accounts payable workflow ensures accurate financial records, timely payments, and strong vendor relationships.

    The accounts payable process involves invoice processing and vendor communications in managing a company’s financial obligations to its creditors and vendors. The accounts payable process starts with the receipt and validation of the invoices received from the vendor. Next step in the accounts payable workflow process is the coding of the invoices with the correct General Ledger account and the data entry or data capture from invoices. The invoices are routed for approval if that is a requirement in the workflow. The payment files are created next in the accounts payable process and transmitted to the bank for payment to the vendors. The final thing in the accounts payable process steps is the reconciliation of payments against the vendor invoices received and the creation of any required accounting reports.

    The accounts payable workflow process (often called the accounts payable cycle) covers every step required to manage a company’s obligations to vendors—from accounts payable invoice processing to payment and reconciliation. A well-run accounts payable processing function ensures that invoices are captured accurately, approved on time, and paid in accordance with policy and terms.

    How the Accounts Payable Process Works 

    The accounts payable process flow follows a structured workflow to ensure that vendor invoices are accurate, approved, and paid on time. While the exact flow may vary by organization, the standard accounts payable cycle process typically includes the following steps:

    • Invoice receipt: The business receives an invoice from the vendor, either electronically (email, portal, EDI) or in paper form. Centralized invoice intake helps prevent missed or duplicate invoices.
    • Invoice Verification: Invoice verification is a crucial step in the accounts payable workflow. Invoice details are verified against purchase orders and delivery receipts to confirm quantities, pricing, and terms. This may include 2-way or 3-way matching, depending on company policy.
    • Coding and Data Capture: Invoices are coded to the correct general ledger (GL) accounts, cost centers, projects, and tax categories. Automated data capture tools reduce manual errors and accelerate accounts payable processing.
    • Approval Workflow: Invoices are routed through an approval matrix based on departments, thresholds, or project ownership. Approval workflows in the accounts payable process flow provide visibility, audit trails, and accountability.
    • Payment Processing: Once approved, payments are scheduled and executed according to agreed payment terms using ACH, wire transfer, card, or check. Proper controls at this stage help reduce fraud risk and late fees.
    • Record Keeping and Reconciliation: The transaction is recorded in the accounting system, payments are reconciled against invoices, and reports such as AP aging and accruals are generated for financial reporting and compliance.

    These structured accounts payable process steps help organizations maintain financial control and avoid payment errors.

    Step

    Description

    Key Outcome

    Invoice Receipt

    Receive invoice from vendor

    Capture data

    Invoice Verification

    Match with PO/GRN

    Accuracy ensured

    Coding & Data Entry

    Assign GL codes

    Financial tracking

    Approval Workflow

    Route for approvals

    Control & compliance

    Payment Processing

    Execute payment

    Timely vendor payment

    Reconciliation

    Match payment & invoice

    Accurate reporting

    Accounts Payable Process Steps Explained

    The accounts payable process steps include:

    • Invoice receipt and capture
    • Invoice verification and matching
    • Coding and data entry
    • Approval workflow
    • Payment processing
    • Reconciliation and reporting

    Why the Accounts Payable Process Workflow Is Important

    An effective accounts payable cycle plays a critical role in financial operations. It helps organizations:

    • Maintain accurate financial records and audit readiness
    • Avoid late payments, duplicate payments, and disputes
    • Improve cash-flow visibility and forecasting
    • Strengthen vendor trust and supplier relationships
    • Reduce operational risk and manual rework

    A weak or inconsistent accounts payable process often results in delays, compliance issues, and higher processing costs.

    Who Uses the Accounts Payable Process?

    The accounts payable process is used by organizations of all sizes and across industries. Common users include:

    • Small businesses: To track vendor bills and manage cash flow efficiently.
    • Medium and large enterprises: To handle high volumes of invoices with multiple approval layers.
    • Finance and accounting teams: To ensure accurate financial reporting and compliance.
    • Accounts payable clerks and managers: To manage invoice processing, payments, and vendor relationships.

    A well-defined AP process helps these users reduce errors, control expenses, and maintain strong vendor trust.

    Accounts Payable Workflow vs Process Flow

    The accounts payable workflow refers to the movement of invoices through approval stages, while the accounts payable process flow includes the entire lifecycle—from invoice receipt to payment and reconciliation.

    Accounts Payable Process vs Related Concepts

    Accounts Payable Process vs Accounts Receivable

    The accounts payable process manages outgoing payments to vendors, while accounts receivable focuses on collecting payments from customers.

    Accounts Payable Process vs AP Automation

    The AP process defines how invoices move through the organization. AP automation uses software and AI to digitize, accelerate, and control that workflow.

    Accounts Payable Process vs AP Outsourcing

    AP outsourcing involves assigning part or all of the AP process.

    Why Outsource the Accounts Payable Process?

    Accounts payable process outsourcing lets companies leverage specialist teams and automation to speed accounts payable invoice processing, improve accuracy, and cut costs. Providers bring proven playbooks, duplicate-detection controls, and KPIs that stabilize the accounts payable cycle and standardize each accounts payable procedure across entities and locations.

    Benefits of AP Outsourcing

    • Faster accounts payable processing with SLA-driven turnaround
    • Fewer exceptions via automated accounts payable invoice processing and 2/3-way match
    • Stronger governance of the accounts payable cycle (audit trail, approvals, segregation of duties)
    • Lower total cost through automation and scale

    Best Practices for Invoice Processing & Controls

    • Centralize intake to a monitored AP inbox/portal to avoid accounts payable invoice processing delays.
    • Use GL templates and vendor-specific rules to standardize your account payable procedure.
    • Track exception causes (price/qty/freight/tax) to continuously improve accounts payable processing.
    • Align payment cadence with cash-flow goals while protecting early-payment discounts.

    How ARDEM Helps with Accounts Payable Process Outsourcing

    ARDEM applies business process automation, AI, and cloud platforms to modernize every step of the accounts payable process. We deliver rapid, accurate accounts payable invoice processing, enforce controls across the accounts payable cycle, and standardize your accounts payable procedure with real-time visibility and measurable KPIs.

    Learn more in our accounts payable process outsourcing section and see how we can upgrade your accounts payable processing end-to-end. Reach out to us today for more information.

    Common Mistakes in the Accounts Payable Process

    Even with a defined workflow, errors in the accounts payable process can lead to financial losses and operational delays. Common mistakes include:

    • Duplicate payments: Paying the same invoice more than once due to poor tracking.
    • Delayed approvals: Slow approval workflows causing late payments and vendor dissatisfaction.
    • Manual data entry errors: Incorrect invoice amounts or vendor details.
    • Poor documentation: Missing or incomplete records that complicate audits.

    Identifying and addressing these issues can significantly improve the effectiveness of the AP process.

    Frequently Asked Questions (FAQ)

    What is the accounts payable process in accounting?
     The accounts payable process in accounting refers to the steps a business follows to receive, verify, approve, and pay vendor invoices while accurately recording liabilities.

    What are the main steps in the accounts payable process?
     The main steps include invoice receipt, verification, approval, payment processing, and record keeping.

    Why is accounts payable considered a liability?
     Accounts payable is considered a liability because it represents money a business owes to its suppliers for goods or services received but not yet paid for.

    Can the accounts payable process be automated?
     Yes, many businesses use accounting software to automate invoice processing, approvals, and payments, reducing errors and saving time.

    What is the accounts payable workflow?
     The accounts payable workflow is the structured sequence of steps used to process invoices, including verification, approval, and payment.

    What is the accounts payable cycle?
     The accounts payable cycle is the complete lifecycle of managing vendor payments—from invoice receipt to final payment and reconciliation.

      Jun 02
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      Accounts Payable Audit – How To Do It?

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      An accounts payable audit is an independent review of a company’s accounts payable records. The Accounts payable audit is aimed at checking if the payments are accurate, properly authorized, and made on time, and if transactions are recorded properly. Companies consider experienced business process outsourcing (BPO) service providers or accounts payable audit firms for auditing accounts payable to maintain their AP processes.

      When to Engage Accounts Payable Audit Firms

      When Should Companies Work with Accounts Payable Audit Firms?

      Organizations often partner with accounts payable audit firms when internal resources lack the expertise or time to conduct an independent AP review. External auditors are especially valuable when:

      • AP volumes are high or rapidly growing
      • There is a history of duplicate or late payments
      • Compliance requirements are complex
      • Businesses are preparing for financial audits or regulatory reviews

      Experienced accounts payable audit firms provide objective insights and help organizations strengthen AP controls and efficiency.

      Detailed Audit Steps

      Key Steps in an Accounts Payable Audit

      An effective accounts payable audit involves a series of detailed steps that help identify errors, inefficiencies, and compliance gaps within the AP process. Common audit steps include:

      • Reviewing vendor master data for duplicates or inaccuracies
      • Verifying invoice approvals against authorization policies
      • Testing payment accuracy and timing
      • Identifying duplicate or fraudulent payments
      • Reviewing accruals and cut-off procedures\
      • Ensuring proper documentation for all AP transactions

      These steps help ensure that the accounts payable audit program delivers accurate insights and reliable findings.

      Internal Controls Reviewed During an AP Audit

      Accounts Payable Controls Reviewed During an Audit

      A critical part of account payable auditing is evaluating the effectiveness of internal controls. During an accounts payable audit, auditors typically review:

      • Segregation of duties: Ensuring invoice processing, approval, and payment are handled by different individuals
      • Approval controls: Confirming that invoices are approved according to defined authority limits
      • Three-way matching: Matching purchase orders, invoices, and receiving documents
      • Access controls: Restricting system access to authorized personnel
      • Audit trails: Maintaining clear records of approvals and payment history

      Strong controls reduce the risk of errors, fraud, and non-compliance in accounts payable operations.

      Accounts Payable Audit Checklist

      The following checklist can help companies prepare for an accounts payable audit and support auditors during the review:

      • Are all vendor invoices properly documented and approved?
      • Are payments made according to agreed payment terms?
      • Are duplicate vendors or invoices identified and resolved?
      • Is three-way matching consistently followed?
      • Are AP reconciliations performed regularly?
      • Are access rights and approval hierarchies clearly defined?

      Using a structured checklist strengthens the accounts payable audit program and improves audit readiness.

      Four Stages of Accounts Payable Audit Program

        1. Planning for an Accounts Payable Audit 

        Start by scheduling the Accounts Payable audit. The meeting is scheduled to discuss standard operating procedures (SOPs). The company and the accounts payable auditors establish the goals and parameters to create a precise Accounts Payable audit plan.

        2. Record Examination – Fieldwork for Accounts Payable Audit Procedure  

        The second step of the accounts payable audit program is the fieldwork phase. In this stage, accounts payable auditors dive deep into Accounts Payable records and documentation. Auditors spend several days or weeks to determine if the transaction records are correct using a cut-off test, depending on the company’s size. They look over the company’s financials – Balance sheet, general ledger, purchase orders, vendor or supplier invoices, and other documents.  

        3. Accounts Payable Audit Reporting 

        After completing the fieldwork, accounts payable auditors put the findings into a final accounts payable audit report that compiles and analyzes the research. Auditors provide feedback. They highlight guidelines and any immediate issues and concerns.

        4. Accounts Payable Audit Follow-up Review

        An Accounts Payable audit report is not the end of the accounts payable audit program. Based on the report, there will be a follow-up to determine that the company has resolved the highlighted concerns and achieved satisfactory results.

        Accounts Payable audit not only confirms whether the company is following proper processes, but it also helps to know how it can run the business more efficiently. By partnering with trusted accounts payable outsourcing companies as your accounts payable auditors, companies can transform AP processes and resolve concerns highlighted in the audit report to drive efficiency.

        Jun 02
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        How can my Accounts Payable Department save money? 

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        A company’s accounts payable (AP) department can save money in several ways as defined below: 

        1. Negotiating Payment Terms with Vendors: The Accounts Payable department can negotiate with vendors and suppliers for longer payment terms. It enables the company to save money in their accounts by delaying payment.  
        1. Early Payment Discounts: Accounts payable departments can receive discounts offered by vendors for early payments. It allows companies to save on the cost of goods or services. It requires adequate cash flow in the company. Accounts payable outsourcing can help companies in effective cash flow management.  
        1. Automation: Companies can automate their payment processes for accurate data with minimal human effort. Errors prolong invoice processing. Automation can reduce error-related costs. Reputed business process outsourcing companies, like ARDEM, can provide 99.7% accuracy using the latest technologies for invoice capture, data entry, validations, processing, etc. 
        1. Outsourcing Trained Teams: Companies can outsource their Accounts payable department with ARDEM to avoid the costs of recruiting and training the staff. Scale up an Accounts payable team of skilled personnel quickly and conveniently.  
        1. Reduced Processing Costs: Corporations, which shift to automation from manual Accounts payable can benefit from cost-effective invoice processing. Manual invoice processing can cost around $12-$13 per invoice. An automated Accounts payable system can reduce the cost per invoice significantly. 

        Thus, companies can outsource accounts payable with experienced BPO (Business Process Outsourcing) service providers to leverage their latest technologies and business process automation. 

        Nov 19
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        How Do I Go About Planning My Data Capture Project?

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        ARDEM connects and consults on your project goals. Along with project requirements we put together a highly skilled team to solve your data capture issues and assignments. The aim is to focus on in-house data entry technologies based on the defined tasks in the most efficient manner and deliver the most accurate data to you. We are also open to explore various new software and methods if the project demands so.

        We take details of your current data capture process, if any. We understand your outsourcing goals in terms of outsourcing, the requirement improvements and current resources being used. It is important to nail down clear end goals in terms of business growth requirement, cost, streamlining of processes or all. If your projects demands so, we create the data entry process from scratch and work through the workflow test and pilot production and final data production stages.

        Nov 19
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        What is the Accuracy & Quality of Data Capture?

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        ARDEM operates at a 99.97% or higher accuracy of data for our clients. To achieve the highest accuracy, ARDEM Data Capture platform use double key data entry along with data quality checks, validation routines, and data verification checks to assure the highest accuracy of data possible. We work in three shift basis with maintenance of continuity so that workflow and quality is unaffected.

        Nov 19
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        What Business Processes Can I Outsource With Data Capture Services?

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        You can outsource Business Processes (often referred to as Back-Office Processes) related to Data Processing and Data Management in Accounting, Marketing, Sales, Manufacturing and Human Resources. Any, information that is available in digital format and is actionable based on a rule structure can be outsourced.

        The processing and management of any information that first needs to be digitized to make it actionable can be outsourced. Examples, of tasks that can be outsourced are- Accounts Payable Processing, Energy and Payment data processing from Utility Bills, collection and analyses of Market Survey data, processing and fulfillment of customer orders, processing of freight bills of lading, and on and on.

        Within HR & Production we also capture data from specification sheets, inventory, disbursements, resumes and other databases that need to be created.

        ARDEM helps you collect data in handwritten, machine typed, digital, paper, and various other formats. All data is collected, organized, reported on & captured as specified by you. With a mix of ARDEM Data Capture and ARDEM Data Entry platform, we ensure that all data is delivered with the highest data accuracy.

        Information is being collected and processed in every business process and each functional area- Accounting, Marketing, Sales, Production, Human Resource, for business insights.

        • In Marketing customer data is being collected, market surveys are being conducted.
        • In Sales, orders are coming from customers and are being entered into the system.
        • Accounting requires incoming invoices to be entered into the system.
        • Production data from specification sheets and inventory, disbursements are being recorded.
        • Human Resource data is being collected from resumes and databases are being created.

        Various input methods such as Surveys, Rebates, Claims, Application Forms, Mailing lists, Invoices, Sales Orders need data to be captured or transcribed from the incoming source format into the enterprise system. Data may also need to be collected and compiled with data mining and data indexing services. With a mix of ARDEM Data Capture and ARDEM Data Entry platform, we ensure that all data is delivered with the highest data accuracy. ARDEM is a data entry company that has consistently delivered highest quality data, every time.