Why and how to reconcile supplier statements

If you are in the accounts payable (AP) department, you may have heard of reconciliation and supplier statement reconciliations. It is an incredibly important aspect of AP processes, but why and how exactly does it work? Keep reading to find out more about why and how to reconcile supplier statements.

What are supplier statements?

Firstly, supplier statements are documents that show the business’ position with a certain supplier. It can contain various items that have been invoiced by the supplier and not yet paid by the business, meaning that any outstanding invoices and credit notes are visible on a supplier statement.

As a result, once you have been issued the supplier statement, you are able to then reconcile this statement with the business’ own account to account, checking for any differences to ensure that the overall business ledger is accurate.

Why is it important to reconcile supplier statements?

As mentioned above, reconciling supplier statements can help the AP team keep track of any unpaid invoices and credit that is due to the supplier so that the cash flow of the business can be maintained. This also means by validating that the business balance is correct, you can rest assured that any financial reports produced will be accurate. This is useful for informing business decisions and gaining valuable insights into the financial state of the business.

By reconciling supplier statements, fraudulent and erroneous invoices are able to be identified before the money leaves the business account, allowing time for the AP team to fix any issues that could cause both money and time problems. Regularly reconciling supplier statements is also beneficial for improving supplier relationships as many businesses only tend to start the reconciliation process when the supplier demands payment.

How reconciling supplier statements works

Although it is possible to manually reconcile supplier statements, this is often a time-consuming and tedious task. Instead, with certain softwares, AP teams can simply automate supplier statement reconciliation processes to improve efficiency and for better time management.

For example, automated reconciliation platforms often have the ability to spot and highlight any errors on their own, saving AP team members time and eye strain from constantly scrolling through a spreadsheet for discrepancies. This means that AP staff are thus able to focus on other important tasks that require their full attention. Automated reconciliation platforms may also provide the option to notify suppliers and keep them updated on the status of their invoices which is helpful for both the business and suppliers alike.

So what are the steps taken in the supplier statement reconciliation process? If you are using an automated system, this is how a typical supplier statement reconciliation may occur:

1. The supplier statement is inputted in the reconciliation system
2. The system extracts key information from the statement
3. The extracted details from the supplier statement is reconciled with your business’ invoice data (that should already be on the system)
4. Any discrepancies or errors are immediately identified and summarised in a report for your benefit

This report is therefore able to be shared with other AP members or external sources, allowing you to easily communicate the discrepancies.

And there you have it – all the basics of why and how to reconcile supplier statements.