Vendor Reconciliation
What is vendor reconciliation?
It’s an accounts payable process that verifies and confirms the vendor balances at the end of the reporting period.
What are the records required for vendor reconciliation?
vendor statement, purchase order, Delivery challans, Invoices, payment receipts and bank statements
What is the process?
1. Checking opening balance as per the vendor statement with the opening balance as per GL account.2. Compare the vendor statement with company’s AP ledger for the respective individual supplier.
3. Even if the balances match, proceed with completing the rest of the reconciliation. This is to ensure that there are no discrepancies at individual level.
4. Proceed with invoice matching
a) Match the invoices listed in vendor statement against invoices received & reported by the company in AP ledger.
b) Parallelly, ensure relevant fields like invoice number, date, quantity, prices and taxes mentioned in the vendor invoice, matches with what is appearing in the vendor statement and company’s AP ledger.
5. Verify payment records
a) Next step would be checking whether the vendor has properly accounted for all the payments the company has made, over the said period. This is done by cross verifying payment records in books to payment details (amount and payment date) listed in the vendor’s statement.
b) Ensure that credit notes & discounts if any, are given effect to by the vendor in their statement & the company also has accounted the same in its books.
After thorough reconciliation
6. If it is observed that the discrepancy is because of errors at vendor’s side, raise the issue with the vendor, show the relevant supporting and follow up with vendor for revised statement.
7. If the discrepancy is observed at company’s side: make necessary rectifications and adjustments in AP ledger.
How frequent is it done?
Vendor reconciliation is performed on a regular basis, such as monthly or quarterly.