Vendor Reconciliation – Meaning, Format, Process

Vendor Reconciliation – Meaning, Format, Process

The process of comparing a vendor's account to the statement they provided is known as vendor reconciliation. 

To reconcile vendor statements, vendor invoices must be compared to the entity's system. 

It is necessary to check the organization's good vendor balance and the vendor payables account balance. 

A company can ensure that everything runs smoothly between the prices the vendor charged and the supplies, inventory, or services received by reconciling vendor statements.

Vendor reconciliation finds discrepancies between the vendor acc and the system. 

You can strengthen vendor relationships, decrease vendor inquiries, and have more control over vendor expenditure with the aid of this report. 

Controllers need help ensuring timeliness and accuracy overall in the reconciliation process since there are so many daily transactions and statements to reconcile. 

A company may overpay vendor invoices and be ignorant of them because of a flaw in the vendor reconciliation system.

What is Vendor reconciliation meaning?

The process of comparing a vendor's account to the statement they provided is known as vendor reconciliation. 

Vendor invoices and the entity's system must be compared to reconcile vendor statements. 

It entails checking both the amount of the vendor payables account and the entity's outstanding vendor balance. 

By reconciling vendor statements, a business can make sure that there are no discrepancies or errors between the prices the vendor charged and the prices of the goods, inventory, or services the business received.

To meet these objectives, controllers must know how to successfully and effectively manage the vendor reconciliation process. 

By using reconciliation statements, you can discover payments you made that the supplier should have recorded in his accounts. 

You can also see discounts that your seller still needs to enter. The amount owed to the supplier will be decreased if all of these entries are corrected.

The accounts payable ledger can be completed more quickly by automating this procedure. You will save time if you do not have to read each document separately.

Since each vendor's system might produce a distinct style or format, a business may likely receive vendor statements in several forms. 

Email-based statements are often sent in Excel or PDF format. Other vendors may send you print statements in the mail.

Since the supplier statements come from different sources, they are received in a variety of formats. 

In rare cases, they may also send it to recipients as emails, spreadsheets, or PDF files. 

Data from supplier statements are immediately updated in the template for the reconciliation statement to create a good reconciliation statement and complete the audit trail.

What is the vendor reconciliation procedure:

To build a supplier reconciliation, adhere to these steps and may also use the vendor reconciliation format:

Beginning with a comparison of the opening balances on the supplier statement and the accounts payable ledger is the best course of action.

Verify the accuracy of each ledger entry by comparing it to the supplier statement. 

This brings the second step to a close. The reconciliation statement may be removed from the entries that agree.

The third stage involves allocating credit notes and discounts. Each credit note and payment on the supplier statement and the associated invoice must match.

Below given is an example of the vendor reconciliation format:

Traditionally, for vendor reconciliation format, this process was carried out by hand. 

However, automated software is accessible now that digitalization has taken hold. 

The accounting software itself can be used to build an automated reconciliation system. 

The software automatically completes the account payable ledger reconciliation process by extracting data from the supplier's statement. Significantly less time and effort are expended.

Even though the advantages of vendor reconciliation are alluring, regularly comparing hundreds of vendor invoices and related documents can be time-consuming. 

The process of manually matching sentences and creating many spreadsheets for vendor reconciliation format involves a lot of printing, browsing, and fiddling. 

The steps listed below are typically followed when reconciling vendor accounts:

1. Checking the Opening Balance  

Before moving on to the next step of the vendor reconciliation process, the opening balance on the vendor's account payables ledger and the balance on the vendor statement must match.

2. Comparing Line Items

 It is necessary to contrast the line items on the vendor statement and invoice. 

Businesses typically reconcile vendor invoices after receiving shipments to ensure that the invoices accurately reflect the quantity and value of the cargo. 

The overall reconciliation process excludes all items that appear on the vendor's accounts in both the accounts payable and vendor statement.

3. Differences 

All items on the vendor statement but not in the account payable ledger or on the vendor statement but not in the account payable ledger are still there but were not eliminated in the previous phase.

4. Verification of Accuracy  

Each purchase transaction is looked at. All vendor invoices and associated paperwork are assumed to be printed on paper. 

The variations between the approved and processed versions of the papers are then checked for. Additionally provided is a real-time validation of the transaction recording.

The responsibility for timely posting and processing of vendor bills falls to accounts payable.

The processing department or the appropriate authorizing department thoroughly questions any discrepancies.

5. Payments and Credit Notes

Every payment and credit note that is on the supplier record must be by the related invoices.

Account reconciliation meaning

Account reconciliation meaning involves matching supporting records such as bank statements, sub-ledgers, and other details of underlying transactions with balance-sheet general ledger acc. 

Accounting professionals look into the reasons behind discrepancies in final balances and make the required adjusting entries to fix mistakes or omit transactions.

On a weekly and yearly basis, accountants reconcile the accounts when they shut the books. 

They combine an ERP with specialized automation reconciliation software to complete it in real time. 

An audit trail is part of the automatic reconciliation tool. Hence this gives the meaning of accounting reconciliation meaning.

Comparing the balances of general ledger balance sheet accounts to the pertinent sets of records and bank statements is the process of account reconciliation. 

A rolling timetable that displays the beginning balance, additions and subtractions and final balance is also included for each account.

Payables receivable

If client invoices and credits are accrued rather than manually entered, the aged accounts receivable journal information cannot match what is shown in the main ledger. 

Customer account write-offs must be reported against the Allowance for Doubtful Accounts, which is netted against Accounts Receivable in financial statements. Transcription errors could cause disparities.

Receipts must be generated

Accountants check the balance of accounts payable in the general ledger with the supporting subsidiary journals. By GAAP, liabilities and accounts payable must be reported using accrual accounting.

The payables account for which the sum on a credit card statement corresponds must be in the general ledger.

After batch payment runs employing AP automation and global mass payments software are complete, reports for real-time automatic payment reconciliation with the general ledger are generated. Your ERP system is connected to automation software.

What are Common Account Reconciliation Discrepancies?

Unaccounted-for transactions, transaction mistakes, and postponed general ledger entries can all hinder account reconciliation.

Misclassifying an asset as a cost or entering the same transaction twice in the detailed subsidiary log or sub-ledger are examples of transaction errors.

The accruals from the journal entry for the previous month must be reversed to prevent an error.


Balance sheet accounts are reconciled to ensure that internal controls are in place and that the financial statements are accurate. The accounting cycle includes a step called account reconciliation.

The general ledger should be compared to the supporting bank statements, other external documents, sub-ledgers, rolling cumulative depreciation schedules, and accounting analysis schedules, which could be Excel spreadsheets, to perform the account reconciliation. Also, general ledger balances and financial statements must use consistent figures.

FAQ’s Relate to Vendor Reconciliation 

1. What is the purpose of an account reconciliation?

Balance sheet accounts are reconciled to ensure that internal controls are in place and that the financial statements are accurate. The accounting cycle includes a step called account reconciliation.

2. What is an example of reconciliation?

Comparing an internal cash receipts and payments record to a bank statement comparing a statement of accounts receivables to a customer's list of delinquent invoices. Comparing a supplier's account to a list of past-due bills kept by the business.

3. How do you reconcile?

Reconciliation aims to rebuild and repair the relationship. Mutually agree to move past the past—exchange goals for the partnership one at a time. Make a list of manageable action items.

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