16 Jan 2022 Ankit Chadha

What Is The Significance Of Vendor Reconciliation And How It Works?

Vendor Reconciliation | TRC Corporate Consulting

In most organisations, vendor payments account for the largest cash outflow, and most organisations outsource their vendor reconciliation process since it is a tedious and lengthy one.  It is one of the most time-consuming processes, plus vendor reconciliation also has to be accurate. So what exactly is vendor reconciliation?

Vendor reconciliation is the process of settling all bills and payments with the vendors and suppliers. To be specific, vendor reconciliation refers to a  statement showing a difference of company payable to vendor a/c balance & vendor outstanding balance. So, if there is any advance to the vendor, the balance from the company payable amount will reduce through vendor reconciliation.

What is a Vendor Statement?

A document from the vendor's accounting system listing all unpaid invoices at a specific date is known as a vendor statement. This statement contains other uncleared items such as credit notes and payments. Vendor statement reconciliation entails matching the invoices and other lines to documents from your system, and the unmatched documents are the differences that encompass the vendor statement reconciliation report. It is a single report that represents all the possible matters with your vendor account.

Now that you know what is vendor reconciliation, you must learn about these three simple steps that are an essential part of the vendor statement reconciliation

  • You must post the accounts payable journal accurately and adequately to the general ledger and verify it
  • Once you have completed all the postings, you need to verify that you print all the reports for all the aged accounts payable.
  • Confirm that the general ledger is set to the accurate reporting period.

 

Benefits of Vendor Statement Reconciliation System and How It Works

An efficient vendor reconciliation ensures that no inconsistency or hindrances arise when it comes to managing and partnering with third parties and other related business associates. Here are some benefits of performing vendor reconciliation process that can help you understand how it truly works:

Duplicate Payments

When there is a delay in the processing of invoices, a lot of things get affected. For instance, the future supply and the probability of getting settlement discounts get hampered. Subsequently, if vendor invoices go unidentified, organisations must request the vendor to resend the documents, which results in delayed payments. 

Likewise, if invoices get recorded for the wrong vendors in the accounting system, your business ends up paying the incorrect vendor. And when the actual vendor queries it, the organisation might also pay this vendor. As a result, you end up making double payments and thus have to deal with accounting errors.

You can partner with TRC Corporate Consulting and opt for our excellent vendor reconciliation services that can help you conduct flawless business activities.

Deductions and Discounts

Vendor reconciliation helps you recognise discounts that the vendor has not yet made a pass on or for placing claims and returns yet. Identifying such documents reduces the responsibility of payment that your business makes towards a vendor. 

Additionally,  one must post such deductions as early as possible to boost cash flow. Thus,  a timely vendor reconciliation report acts as verified proof the organisations can receive some money back.

How to Reconcile Supplier Statements?

To match millions of supplier invoices and other documents on a monthly basis is a critical and exhausting task, even when considering the benefits of reconciling supplier statements. In addition, the manual matching of accounts might involve printing and ticking or system downloads, so it would be more efficient to digitise some functions, similar to the other AP processes. 

Manually administered and automated supplier statement reconciliation avoids wastage of employee's time while delivering precise results and ensuring legit audit controls. Some commonly used ways of reconciling supplier statements are as follows:

Hiring An Outsourcing Partner

Often, the organisations are unable to implement a solution directly in the current accounting system;  thus, what they need is a new standalone system or support.

For the same, you can outsource an experienced consulting partner who knows the in and out of the market and business to handle the entire vendor reconciliation process of your organisation.

The skilled consultants from reputed consulting firms can handle all transactions, claims, invoices, and taxes to implement effective and timely vendor reconciliation formats.

Select Vendor Statement Formats

Organisations are prone to receive supplier statements in multiple formats as each vendor system follows a different layout. For example, the emailed invoices are in Excel or PDF formats. Other reports can be in hard copy format, which can be either sent via mail or through courier to your organisation's address.

The expert consultants help the vendors conform to a single statement template and the automated supplier reconciliation solution to load all formats and layouts. This makes sure that you don't have to type the statement data every time into the system.

The No Paper Approach

Approving vendor reconciliations in the organisation's system will make sure of a complete audit trial. These accepted reconciliations are to be emailed to the supplier to have proper knowledge about all the issues.

However, if there is any need for filling in the future, the company can use the stored original statements and the finalised agreements in the accounting system.

Why Choose TRC For Vendor Reconciliation Services?

At TRC Corporate Consulting, we offer you the best outsourced accounting services that provide in-depth technical precision for all accounting functions. Our panel of experts assess with a deeper understanding of the organisation's requirements before forming a strategy. As a result, we help you move forward in the right direction to achieve your business goals with comprehensive accounting solutions. 

Today, we are known for determining the best practices for the process of vendor reconciliation in the market. So, go ahead and browse through our range of consulting and advisory services including, taxation, audit, fixed asset reconciliations and GRC functions. You can trust us as we promise to obtain accurate outcomes within the given deadlines. Have you got any questions? Contact us now!

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