How vendor reconciliation can help reduce late-payment exposure

A supplier calls to chase an overdue invoice. The accounts payable team checks SAP and finds no record of it.

The supplier insists the invoice was sent six weeks ago and points to the outstanding item on its latest statement. The AP team asks for another copy, routes it for approval and adds it to the next available payment run.

The organisation records another late payment, even though nobody made a deliberate decision to delay it.

This is a common path from a missing invoice to a missed payment date. The problem is not discovered when the invoice first fails to reach SAP. It is discovered later, when the supplier statement is reconciled or the supplier begins chasing payment.

The proposed measures in the government’s official Commercial Payments Bill overview make the speed of this process more important.

Late payment often begins before the due date

Payment performance is usually measured by looking at whether an invoice was paid within the agreed terms.

That final measure does not explain where the delay began.

An invoice might be missing from SAP because it was sent to the wrong address, rejected by an automated inbox or directed to the wrong business entity. It may have been posted with incorrect information, preventing it from matching the purchase order or supplier statement.

Other invoices enter a dispute because the quantity, value or tax treatment does not agree with the organisation’s records. The issue may be legitimate, but it still needs to be identified, assigned and investigated.

By the time the invoice reaches its due date, the AP team may already have lost much of the available time.

Reducing late payments therefore depends on how quickly the process detects the original exception.

Why supplier statement reconciliation matters

The supplier statement shows what the supplier believes the organisation owes. SAP shows the invoices, credits and payments posted to the vendor account.

Reconciling the two identifies where those records agree and where something is missing or incorrect.

A statement may contain an invoice that is absent from SAP, a payment that has not been allocated or a credit note that the organisation has not received. It may also reveal differences in invoice values or items that both parties believe are under dispute.

When statement reconciliation happens promptly, the AP team has time to retrieve missing documents and resolve differences before the payment deadline.

When it takes place at the end of the month, the process becomes more reactive. The team may be investigating an invoice that is already late or approaching the proposed deadline for raising a dispute.

The manual process hides problems for longer

Standard SAP does not include a built-in function for reconciling external supplier statements against the accounts payable ledger.

As a result, teams often export vendor account data to a spreadsheet, place it beside the supplier statement and match the entries manually.

This approach depends on the time and experience available within the AP team. High-volume suppliers may receive regular attention, while other statements wait until somebody has capacity to work through them.

The process can also become person-dependent. An experienced clerk may recognise recurring timing differences or understand how a particular supplier records credits. If somebody else covers the account, the same issue must be investigated again.

In a multi-entity organisation, different AP teams may reconcile the same global supplier in different ways. Each entity has its own statement, company code, currency and local process. The group has no consistent view of outstanding exceptions across the wider supplier relationship.

The longer reconciliation takes, the longer missing invoices and mismatches remain hidden.

The proposed 30-day dispute period

The Commercial Payments Bill proposes a time limit for raising invoice disputes.

Under the current proposal, a business would generally need to dispute an invoice within 30 days of receiving it. Raising the issue later could leave the purchaser liable to pay the invoice in full within the agreed terms, with statutory interest applying if payment becomes late.

This places more pressure on the AP team to recognise a discrepancy early.

A supplier statement mismatch identified on day five gives the organisation time to investigate. The same mismatch found on day 28 creates an immediate deadline. If it is not found until the following month, the proposed dispute period may have passed.

The Bill is still before Parliament, but it gives finance teams a useful reason to examine the timing of their current reconciliation process.

Automating vendor reconciliation inside SAP

BEST Vendor Recons imports and processes supplier statements inside SAP, where the accounts payable information already sits.

The module automatically matches statement items against SAP vendor account data. Items that agree can be processed without manual intervention, while missing invoices, value differences and other exceptions are surfaced for the AP team.

This changes the focus of the work. Instead of manually comparing every line, the team can concentrate on the smaller group of exceptions that require investigation.

Because the process runs inside SAP, it uses the organisation’s existing financial data, logins and authorisations. The reconciliation history remains within the same environment rather than being stored in a separate external platform.

For a multi-company organisation, the same approach can be applied across company codes, helping teams reconcile shared suppliers more consistently.

From faster matching to better payment performance

Automation does not remove every invoice dispute. Suppliers and customers will still disagree about quantities, prices, delivery and other commercial issues.

What it can do is identify those differences sooner.

Earlier visibility gives the AP team more time to find a missing invoice, contact the correct business owner or raise a dispute with the supplier. It also reduces the number of items that remain unnoticed until the supplier begins chasing payment.

Heineken Beverages automatically matches 99% of items across more than 700 vendor reconciliations each month using BEST. Foodstuffs reduced its 300-vendor reconciliation process from 1.5 days to 25 minutes.

These results create more capacity for exception handling, which is where the AP team can have the greatest influence on future payment performance.

Assessing the current process

The most useful measure is not simply how long a supplier statement takes to reconcile. Finance leaders should also understand how old an invoice exception is when the team first becomes aware of it.

If missing invoices are regularly discovered close to or after the payment date, the process is identifying the right issue too late.

The same applies to disputes. The organisation needs to know when the invoice was received, when the discrepancy was found and how long it took to reach the person responsible for resolving it.

Vendor reconciliation sits between the supplier’s view and the organisation’s SAP records. Improving that process gives AP teams earlier warning that the two no longer agree.

To see how BEST Vendor Recons automates supplier statement matching and exception identification inside SAP, book a demo.