Accounts payable reconciliation: subledger, GL and vendor statements

"Accounts payable reconciliation" means two different checks, and AP teams often do only one of them. The first ties your AP subledger (the aging report) to the accounts payable balance in your general ledger. The second ties your AP, vendor by vendor, to what each vendor says you owe. The first proves your books agree with themselves. The second proves they are complete.

This guide covers both: the month-end steps, the usual causes of a difference, and how the two checks fit together.

Check 1: AP subledger to general ledger

Your ERP keeps a detailed record of every open invoice and credit by vendor: the AP subledger, which you see as the AP aging report. It also posts summary entries to an accounts payable control account in the general ledger. At month end, the total of the aging should equal the balance of the control account.

The steps

1. Close the period's AP entry. Post all invoices, credits and payments dated in the month. Release or delete any unposted batches.
2. Run the AP aging as of the last day of the month. Use the same date as the GL balance, not today's date.
3. Pull the GL balance of the AP control account (or accounts, if you have several) as of the same date.
4. Compare the totals. If they agree, record the reconciliation and keep the two reports together.
5. If they differ, find out why, using the causes below, and correct it before the month is closed.

Why the two disagree

• Journal entries posted straight to the AP control account. An accrual, a reclass or a correction posted in the GL never touches the subledger. Many ERPs can block direct posting to control accounts; it is worth checking whether yours does.
• Accruals. Goods received but not yet invoiced are often accrued in the GL in a separate account. If they were posted to the AP control account instead, the GL will be higher than the aging.
• Timing and cut-off. An invoice entered in the subledger with one date and posted to the GL in another period.
• Unposted or partially posted batches. The subledger shows them; the GL does not yet, or the reverse.
• Voided or reissued checks handled differently on the two sides.
• Foreign currency revaluation, if you have vendors billing in other currencies, posted to the GL but not reflected in the aging, or the reverse.
• Report settings. An aging run by due date instead of document date, or with some vendors or document types filtered out.

A worksheet for the difference lists each item with its amount, so the total of the items equals the difference exactly. A difference you cannot explain should not be carried forward as "unreconciled" month after month; it grows harder to find each month.

Check 2: AP to vendor statements

Subledger-to-GL can agree perfectly while your AP is missing an invoice altogether. If an invoice never reached AP, it is in neither the aging nor the GL, and nothing in Check 1 will notice. The same goes for a credit memo the vendor issued that you never recorded.

The only outside evidence of what you owe is the vendor's own record: the statement of account. Reconciling statements against your AP catches:

• invoices on the vendor's statement that are missing from AP,
• credits the vendor issued that AP has not applied,
• payments you made that the vendor has not posted,
• invoices recorded at a different amount on each side.

The vendor statement reconciliation guide covers the monthly process step by step, and the template guide has a spreadsheet layout for it.

How the two checks fit together

Do Check 1 first, so you know the aging you compare statements against is the same number as the books. Then do Check 2 for your key vendors.

What to keep for the auditor

Auditors often ask how you know your payables are complete. A tidy answer has:

• each month's aging, GL balance and difference worksheet, signed off,
• the vendor statements you collected, with the exceptions and how each was resolved,
• the list of vendors asked for a statement who never sent one.

How long to keep these, and in what form, depends on your auditor, your industry and your own retention policy; ask your auditor rather than relying on a general rule.

Making the second check routine

Most teams do Check 1 every month because the close requires it. Check 2 slips, because it depends on vendors sending statements and on someone keying them in.

Statement Match handles the second check. It emails each key vendor for its statement on day 3 of the month with a no-login upload link, reminds the ones who have not sent one on day 7 and day 12, and reads PDF, Excel and CSV statements. You upload your open-items and payments exports, review the lines read from each statement, and get one exception list per vendor: missing invoices, unapplied credits, unposted payments and amount mismatches. It does not post anything to your books or replace your subledger-to-GL reconciliation. To see it on invented data, open the sample month.