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How To Reconcile Supplier Statements

By | 2019-02-12T08:17:57+00:00 March 14th, 2016|

Why we reconcile vendor statements was discussed in my previous article. While the benefits may be appealing, it can be an onerous task to match thousands of supplier invoices and other documents every month. Manual matching of statements may involve much printing and ticking, or system downloads and manipulation to produce many disparate Excel spreadsheets.

Automate supplier reconciliations in your existing accounting system

As with other accounts payable processes, it is essential to digitise. A computer or automated supplier statement reconciliation will save personnel time, be more accurate and ensure proper audit controls.

If you can implement an automated supplier reconciliation solution directly in your existing accounting package or ERP, this is preferable to an additional stand-alone system. For example, I spend much of my time working with businesses or shared service centres that run SAP. We implement an add-on module called BEST to automate the supplier reconciliations directly in SAP. Accounts payable personnel then use their existing SAP login, and you don’t require any additional hardware or software. Unfortunately if you cannot implement a solution directly in your current accounting system, then you need to interface all your transactions to a new stand-alone system, which can be technically difficult and unreliable. Cloud solutions are also stand-alone systems that require separate logins, and interface extractors from your accounting system of all supplier master and transactional data. For a Cloud solution, you must also consider the security of your confidential supplier transactions that will now be stored outside of your company environment at another organisation.

Supplier statement formats

You will most likely receive supplier statements in multiple formats, as each supplier system produces a different format or layout. Emailed statements usually come in Excel or PDF. Other statements will be paper via post or delivery. Unless your suppliers are able to conform to a single statement template, your automated supplier reconciliation solution should be able to automatically load all formats and layouts to ensure that you do not need to type the statement data into the system.

Match supplier statements up the procurement chain

If you cannot match the statement to a supplier invoice or credit note from your system, your supplier reconciliation solution should automatically match up the procurement chain:

  • If you use an invoice automation solution such as ReadSoft, OpenText / VIM, Dolphin, eFlow or one of the many on the market, or EDI invoices, you need to be able to match invoices still in processing in this system. Or if you park or held invoices before posting. For example, invoices not yet approved, or with processing errors. If the automatically produced reconciliation report immediately identifies where the invoice is, then this can be quickly resolved.
  • Matching to the GRIR account is also essential to identify statement lines that have no invoice match, but a goods receipt has been posted.
  • If the supplier can provide purchase order numbers on the statement, and the statement cannot be matched to any invoice or GRIR, then identifying the valid PO in your system will help investigation.

Go paperless: approve reconciliations, store electronically & email to the supplier

Rather than signing paper, approve reconciliations in your accounting system to ensure a complete audit trail. Approved reconciliations should be emailed by the system to the supplier, so the supplier has sight of all issues reducing follow up ad hoc queries. Both the original statement and finalised reconciliations should be stored in your accounting system, to alleviate the need for any filing.

What do you think?

Do you believe it is worthwhile reconciling suppliers in the first place, and how do you think it should be done? I’d be interested to hear views from accounts payable professionals as I spend my days implementing systems in this area, and this is a process that is not as consistently followed as other accounting controls.

Over the next few weeks, I’ll publish more articles on various supplier reconciliation methods, such as whether to balance the reconciliation to your supplier ledger balance or to the supplier payment; merits of open item or balance brought forward statements; working with different statement formats; and more.

Would you like to see how to reconcile vendor statements?

If you use SAP, and are currently reconciling supplier statements manually outside of SAP, please contact me to show you how vendors can be reconciled automatically in SAP.