Blog Post
Vendor Reconciliation 101: Ensuring Supplier Accuracy
In Accounts Payable (AP), paying an invoice is the easy part. Ensuring you should pay it is the hard part. Vendor reconciliation—the process of matching your supplier's statement to your own AP ledger—is the primary defense against overpayments, fraud, and strained supplier relationships. Here is your 101 guide to getting it right.
Why Bother Reconciling Supplier Statements?
Many AP teams skip this step, assuming that if an invoice is in the system, it's correct. This is a costly mistake. Supplier statement reconciliation catches the errors that slip through the cracks:
- Missing Invoices: You can't pay what you don't have. Reconciling reveals invoices the vendor sent but your team never received or entered.
- Duplicate Payments: Did you pay invoice #1001 twice? The statement will show a credit balance if you did.
- Unposted Credit Notes: Vendors often issue credits for returns that never get recorded in the buyer's ERP.
The Manual Process (and Why It Hurts)
Traditionally, this involves printing a PDF statement from a key supplier (like Amazon Business or a raw materials provider) and ticking off lines against an Excel export of your AP ledger.
It is time-consuming, boring, and therefore prone to human error. AP clerks often only reconcile the top 10 vendors by spend, leaving the "long tail" of smaller suppliers completely unchecked—a prime area for fraud.
How to Automate Vendor Reconciliation
Modern finance teams use automation to flip the script. Instead of reconciling only the top 10 vendors, you can reconcile all vendors every month.
1. Data Ingestion
Automation tools like Reconwizz can ingest statements in any format (PDF, Excel, CSV, EDI). OCR technology extracts the invoice numbers, dates, and amounts automatically.
2. The 3-Way Match
The software compares the Vendor Statement vs. Your ERP Ledger vs. Your Goods Received Notes (GRN). This 3-way matching ensures that you only pay for goods that were actually ordered and received.
3. Exception Handling
The system flags discrepancies instantly. "Invoice #555 is on the statement but missing from AP." Your team can then request a copy from the vendor with one click, solving the issue before it becomes a past-due payment.
Proactive AP Management
Moving from reactive firefighting to proactive reconciliation transforms the AP function. You capture more early payment discounts, reduce audit risk, and keep your suppliers happy.
Reconwizz empowers your team to handle thousands of supplier statements without adding headcount. (Check out our guide on Automating the AP Process for more details).