Accounting and Reconciliations
Multiple types and number of transactions are part of association with vendors or suppliers of products or services. In and out movement of goods, payments, receipts, returns, discounts and offers. A periodical reconciliation between the inentity and its vendors accounts is a healthy practice to foster professional long term relationship with vendors who are critical to the business.
A vendor reconciliation statement puts forward a detailed understanding of the outstanding payable against the account details provided by the vendor. It is a required document that helps the business to avoid inaccuracy or mistakes regarding the business with the vendor. A lack of visibility and tracking of accounts might lead to the overpayment of the vendors.
Profito Global will help identify in detail the missing transactions and the effect of these transactions from an internal audit point of view. For example, if there is a purchase booked in the supplier account but the same is missing in the books of the client, then there is a serious deviation in accounting at the client’s place which needs to be investigated further. Gaps can be identified as a normal misstatement or purposeful concealment. Identification is the key.
Many benefits can come from the business through the preparation of a vendor reconciliation statement. They are:
- Minimising mistakes.
- Improving relationships.
- Better control over the vendor spending.
- Effective management of vendor queries.
- Proper identification of the outflows.
- To avoid duplication of payments.
The vendor reconciliation process moves through the following steps:
- To compare the opening balance of the ledger account in the entity's records and recordsprovided by the vendor.
- Cross-checking both the documents and comparing the items line by line to identify any missed entrieson both ends. Crossing off entries present in both the documents.
- The entries which haven't been eliminatedor crossed offneed to be reconsidered based on time of entry, any relevant omissions, or manual errors.
- Verification of Entries against the supplier invoices /relevant documents
- The accuracy and authenticity of the transactions are relevant requirements.
- The allocation of credit notes and payments against the respective transactions should be prompt and clear.
The inputs Profito Global expects from the client will be the vendor’s statement of accounts and the invoices concerning the purchases made by the client from the vendor.Also the details of the payment made by the client to the vendor.
The vendor reconciliation statement is tedious and time-consuming. But it is not wise to leave it, as it is an essential document that helps keep track of the vendors' payments. Profito Global helps business organisations to keep a dedicated tab on such activities; when done by the Profito Global experts, it is devoid of errors.
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Why is vendor reconciliation important?
When an invoice generated by a vendor is not entered into the books of accounts, a question arises as to the whereabouts of those goods that were bound to be received by the company. A vendor reconciliation statement ensures that there will be no such ambiguity. It helps in detecting issues between the company’s systems and the vendor accounts.
Why is it necessary to hire a third-party service for your vendor reconciliation process?
There are certain issues that come up while preparing vendor reconciliation statements like missed reconciliations, errors of reversal, duplication of payments, oversights etc. Hiring a third-party service will help with month-end reconciliations, validate payments on account, match receipts of digital transactions, check line items against the general ledger etc are done proficiently and promptly.
What happens when a business neglects vendor reconciliation?
Failing to do vendor reconciliation might resultin discrepancies and unmatchedstatements of accounts which can affect the reporting of financial statements.