Short answer: supplier statement reconciliation is the check that what you owe a supplier in your books agrees with what the supplier says you owe. Put the two balances side by side, tick off every invoice, credit note and payment that appears on both, and explain what is left. Each leftover item is either a timing difference, which needs no correction, or an error, which you fix in your books or ask the supplier to fix in theirs.
What is a supplier statement reconciliation?
A supplier statement is the supplier's view of your account: the invoices they have issued, the credit notes, the payments they have received and the balance at a date. Your purchase ledger (the supplier's account in your accounting software, or the aged payables report) is your view of the same relationship.
The two should agree. When they do not, ACCA's guidance splits the reasons into two kinds:
- Timing differences. Something is correct on both sides but has only reached one of them, for example a payment you sent that the supplier has not yet received. These are not errors.
- Errors. Something is wrong in your records or in the supplier's: an invoice posted to the wrong supplier, a credit note never processed, a discount missed, a digit swapped when the invoice was typed in.
The reconciliation is the written proof that every difference has been found and sorted into one of those two piles.
Why bother?
Three reasons, all practical:
- You find missing invoices before they become late payments. A supplier statement is often the first sign that an invoice went to the wrong inbox.
- You find duplicates and wrong amounts before you pay them. An invoice booked twice shows up as a difference straight away. More on that in how to detect and prevent duplicate invoices.
- Your payables figure is right at month end and year end. An accountant who signs off a balance sheet wants to know the creditors are real and complete.
How to reconcile a supplier statement, step by step
- Get the statement and fix the date. Use the statement date as the cut-off and run the supplier's account in your books to the same date.
- Compare the two balances. Write both down and the difference between them. If it is zero, check a few lines anyway: two errors can cancel out.
- Tick off matching items. Go line by line. An invoice is a match when the invoice number and the gross amount agree. Tick payments by date and amount.
- List what is only on the statement. Typically: invoices you have not received or booked, credit notes you have not posted, and payments the supplier has received from you that you booked to another account.
- List what is only in your books. Typically: payments in transit, invoices booked twice, invoices posted to this supplier that belong to another, and credit notes the supplier has not issued yet.
- Classify each item. Timing or error. If it is an error, decide whose.
- Correct your side. Book the missing invoice (from a copy of the invoice, never from the statement), post the credit note, reverse the duplicate, fix the amount.
- Raise queries for the supplier's side. Payments they have not allocated, invoices you dispute, credit notes they promised. Note the date you asked.
- Prepare the reconciliation. Start from the balance in your books, add or deduct the corrections, then add the timing items. The result must equal the statement balance exactly.
- File it with the statement. Next month starts from the open items on this one.
A worked example
A client's books show €6,250 owed to a building supplies wholesaler at 30 September. The supplier's statement at the same date shows €8,460. The difference is €2,210. Ticking off finds five items:
| Item | Found where | Type | Effect |
|---|---|---|---|
| Invoice 4471 of 28 Sep, €1,230, never received | Statement only | Error, our side | Book it from a copy: +€1,230 |
| Credit note CN-118, €310, for returned goods | Statement only | Error, our side | Post it: −€310 |
| Invoice 4402, €620, booked twice | Books only | Error, our side | Reverse the duplicate: −€620 |
| Invoice 4415 keyed as €1,540, actual €1,450 | Books only | Error, our side | Correct the amount: −€90 |
| Payment of €2,000 sent 29 Sep, not yet on statement | Books only | Timing | No correction |
The reconciliation then reads:
| € | |
|---|---|
| Balance per our books, 30 Sep | 6,250 |
| Add: invoice 4471 not booked | 1,230 |
| Less: credit note CN-118 not posted | (310) |
| Less: invoice 4402 duplicate | (620) |
| Less: invoice 4415 overstated | (90) |
| Corrected balance per our books | 6,460 |
| Add: payment in transit, 29 Sep | 2,000 |
| Balance per supplier statement | 8,460 |
The corrected balance, €6,460, is what the client really owes once the payment arrives. Without the reconciliation the client would have paid the duplicate €620 and overpaid invoice 4415 by €90, and invoice 4471 would have gone overdue.
The differences you will see most often
- Payments in transit. Clear on their own within days. If a payment is still missing from the next statement, ask the supplier to look for it, with the date, amount and your bank reference.
- Unallocated payments. The supplier received the money but put it on account instead of against the invoices. Send them the remittance showing which invoices it paid. One payment for several invoices is the usual cause; see one payment, many invoices.
- Missing invoices. Ask for a copy. Check the inbox and the shared folder first; how to organise supplier invoices covers setting this up so fewer go missing.
- Duplicates and wrong amounts. Usually a sign that invoices are being typed in by hand. Checking each invoice before it is booked catches most of them; see invoice verification.
- Wrong supplier. Common where two suppliers have similar names or one group invoices from two companies. Check the supplier's VAT number on the invoice, not just the name.
How often, and for which suppliers?
You do not need to reconcile every supplier every month. A sensible rule for a small business or a bookkeeping client:
- Monthly: the ten or so largest balances, suppliers you buy from weekly, and any supplier sending reminders.
- Quarterly: the rest of the active suppliers.
- Year end: every supplier with a balance, plus any with a credit balance in your favour.
For accounting firms looking after many clients, put supplier statements in the same queue as the invoices, so they are seen by the person who books that client's bills. The multi-client invoice workflow guide shows one way to set that up.
Can it be automated?
The matching can. Some capture tools now read supplier statements as well as invoices. Dext, for example, reads the supplier, statement date and balance, compares each invoice line with documents in Dext and bills in Xero or QuickBooks, and labels each one as found in both, found in one, missing, or not on the statement. That turns step 3 into a review rather than a ticking exercise. The decisions in steps 6 to 8 still need a person who knows the client.
The bigger saving often comes earlier. Most differences in the example above, the duplicate, the typing error and the missing invoice, start when bills are entered. Fix the intake and the statements start agreeing on their own.
Where Invoreg fits
Invoreg does not reconcile supplier statements itself. It works on the step that causes most of the differences: it reads every supplier invoice, including scans and phone photos, line by line, flags duplicates against the workspace and the bills already in your accounting software, and registers the bill only after a person approves it. Fewer duplicates and typing errors mean shorter reconciliations.
If your supplier statements rarely agree, start with the invoices behind them: try it on your own invoices, the first 20 are free.