Running a business involves working with vendors and making payments to them. The account payables team conducts vendor reconciliation before making the payments to ensure the vendor or supplier charges the proper amount against the company's account. But how does this process work and benefit your business?
Read on to learn how to conduct vendor reconciliation properly and why you should consider automating the procedure.
The vendor reconciliation process in accounts payable involves identifying discrepancies between vendor invoices and your actual expenses. The procedure entails matching the amount your suppliers and vendors bill your company versus how much you actually owe them.
The vendor reconciliation process in accounts payable helps to protect your company from financial risks, particularly spending more than your actual balance.
The main goal of the vendor reconciliation process in accounts payable is to verify vendor invoices and match them with your company's account balance. The process generally includes the steps below.
The first step is to check the opening balances on your company's ledger and the supplier statement. These details will serve as the starting point for your calculations. The current month's opening balance should be equal to the previous month's closing balance.
After checking the opening balances, the next step is to match the line items on the vendor statement with the invoice you received. Check off any matching information as you go through the process.
You must resolve details that are inconsistent with your account payable ledger with your supplier. These items may be present on your logs but can be found missing on the vendor statement or vice versa.
These issues usually occur for the following reasons:
There may be times when a supplier extends a credit agreement to you, which typically indicates the method and terms of payment. In that case, you should ensure all credit notes reflected in the vendor statement should be allocated against the invoice.
Manually conducting vendor reconciliation can be exhausting since it entails time-consuming procedures. As such, automating the process can help your business in several ways.
Your finance team becomes more efficient with automated invoice processing since it saves them time and effort.
Manual vendor reconciliation exposes your company to costly human errors in accounting—overpaying suppliers, not recognising late payments, and double entries or duplicate payments. Automating the process helps avoid such mistakes.
Invoices are prone to get lost among piles of documents that may be too inconvenient to sort through. Expense management software allows you to quickly identify missing invoices and keep the accounting process running smoothly.
Modern payables software like Spenmo makes tracking and managing business expenses easier. The platform shows automated bill payments, custom approval workflows, and accounting reconciliation procedures in a single dashboard that updates automatically. It also integrates with various accounting software. This functionality is a convenient way of closely monitoring your finances in real-time.
Financial reports and audits are essential in determining your business's current financial standing. However, the process of reporting and auditing can be lengthy. Automation software can streamline these procedures for you, allowing you to complete these tasks faster.
Managing business finances is crucial for maintaining smooth business operations. However, poring over spreadsheets and invoices can be challenging and take up too much time and energy.
Spenmo's automated reconciliation feature can expedite the process and protect your company against costly mistakes. The software's bulk payments and vendor management features can also generate and record important vendor details for future use. These functionalities can further save your employees from laborious manual data entry tasks. Talk to us to learn more.