What is vendor reconciliation?

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Vendor reconciliation (also called supplier statement reconciliation) is the process of comparing a company's accounts payable records for a specific supplier against the statement that supplier has issued, to confirm that both parties agree on the outstanding balance.

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It is a standard control within the Procure-to-Pay process and a key check before making significant payments to suppliers.

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Why vendor reconciliation matters

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A company's AP records and a supplier's AR records should always agree — one party's payable is the other's receivable. In practice they often do not, for a range of reasons: invoices received but not yet posted, credit notes applied by the supplier but not yet reflected in the buyer's system, payments made but not yet allocated, or invoices disputed and held.

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Without vendor reconciliation, businesses risk paying invoices that are already settled, missing credit notes they are entitled to, or carrying incorrect liability balances on the balance sheet.

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How vendor reconciliation works

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Step 1 — Obtain supplier statement. Request or download the supplier's statement showing all invoices, credits, and payments recorded on their side.

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Step 2 — Compare to AP records. Match each line on the supplier statement to the corresponding entry in the AP subledger.

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Step 3 — Identify discrepancies. Common discrepancies include invoices on the supplier statement not yet in the AP system, credit notes not yet reflected, and payments not yet applied.

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Step 4 — Investigate and resolve. Each discrepancy is investigated and either corrected in the AP system, queried with the supplier, or noted as a timing difference.

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Step 5 — Confirm agreed balance. Once all discrepancies are resolved, the outstanding balance is confirmed with the supplier before the next payment run.

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How often vendor reconciliation should happen

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For high-value or high-volume suppliers, monthly reconciliation is best practice. For smaller suppliers, quarterly may be sufficient.

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Related: Accounts payable (AP) · Procure-to-Pay (P2P) · Three-way matching · Account reconciliation