For Accounts Payable teams, supplier statement reconciliation has long been neglected and buried under more “urgent” tasks. With teams constantly firefighting or stuck in AP inboxes, there’s little time to complete what is for many a manual and time-consuming process. Without automation, manual reconciliation drains resources and increases the risk of costly errors.
However, skipping reconciliations can be costly. Undetected discrepancies, duplicate payments and invoicing errors lead to inaccurate financial reporting and put cash flow at risk. The solution is to find an automated statement reconciliation workflow to help you increase coverage without increasing your team’s workload.
In this article, we'll dig in to why supplier statement reconciliations are essential for visibility over operations and maintaining strong vendor relationships and how ignoring them can result in expensive errors, strained supplier partnerships and even legal penalties.
Why supplier statement reconciliations should be a priority for AP teams
Supplier statement reconciliations are key to get full visibility over Accounts Payable operations and create more efficient processes. By comparing supplier statements with the payable ledger, your AP team can immediately identity and action discrepancies such as duplicate invoices, missing credit notes and more. These errors can help your team save money and perform root cause analysis to drive process improvements.
Additionally, creating a reconciliation process will help you maintain a proactive relationship with your suppliers, helping you stay on top of supplier queries and avoid potential disputes.
Finally, this enhanced visibility gives your organisation more accurate financial reporting. With timely and consistent reconciliation, you reduce the risk of misreported financial data which can negatively affect strategic decision-making.
A proactive approach means fewer surprises, smoother operations and a team that stays ahead of potential issues.
Xelix offers you an end-to-end automated workflow so you can complete supplier statement reconciliations at scale.
What happens if you don’t reconcile supplier statements?
Increased financial losses due to overpayments and duplicate payments
One of the biggest risks of not performing supplier statement reconciliations is financial loss due to overpayments and duplicate payments. These errors often come from incorrect invoices, manual processing mistakes or poor visibility into supplier accounts.
Without proper reconciliation, businesses may unknowingly pay the same invoice twice or settle invoices with incorrect amounts. Simply matching invoices between the ledger and the statement is a great control to prevent these issues.
Unrecovered supplier credits and missed refunds
When AP teams skip supplier statement reconciliation, they can easily miss credits, refunds or overcharges.
Regular reconciliation is the key to spotting these issues early and keeping cash flow healthy.
We’ve learned from our own customers how easily unapplied credit notes can slip through the cracks. A great example is Liberty Global, a leading telecommunications company. By expanding their statement reconciliation coverage, they uncovered £18 million in unallocated credit notes. These overlooked credits, once identified and applied, led to huge cost savings.
Greater risk of supplier fraud and internal fraud
Supplier statement reconciliation also provides a layer of fraud protection for your payables function.
Not having a structured process for checking supplier balances opens the window for internal fraud. For example, a team member may unknowingly approve a fake supplier and assume they’re a legitimate vendor, which leads to unauthorised payments. Implementing a thorough reconciliation process means your AP team can verify every invoice against supplier statements.
An automated reconciliation solution aids in early fraud detection and ensures transparency and accuracy across transactions.
Supplier disputes and strained relationships
Meeting contract terms is the best way to keep your vendors happy and avoid suppliers suspending services or demanding early payments.
Statement reconciliation ensures that all transactions are correctly recorded, and discrepancies are identified and resolved. Without it, you put your supplier relationships at risk with delayed payments or disagreements over amounts due. An automated supplier statement reconciliation process alleviates these issues by helping your team quickly and accurately match vendor statements with payable ledgers. Your team can spend less time resolving disputes or conflicts with vendors and can instead engage in more strategic, value-add activities.
Compliance and audit risks
Statement reconciliation is a great exercise to improve compliance and reduce audit time by keeping financial records accurate.
Detecting discrepancies, errors and fraud early reduces the number of financial misstatements. Accurate records also strengthen compliance with regulatory requirements, such as SOx or IFRS.
Regular reconciliation also improves internal controls, which helps you minimise audit time and ensure data integrity and financial reporting reliability to prevent penalties or legal issues.
Inaccurate financial reporting and cash flow forecasting
Without reconciliations, discrepancies go unnoticed, and liabilities get misstated which in turn can lead to inaccurate reports and uninformed decision-making.
Working from an inaccurate report can affect everything from working capital management to your overall business strategy. Without a clear view of cash flow, you risk running into cash shortages, missed payments and wasted resources.
Reconciliation gives you full visibility over your financial operations and the transparency to make smarter decisions, forecast more accurately and keep AP running efficiently.
Why some AP teams neglect supplier reconciliations (and why that’s a mistake)
Our team has spoken to many AP team members who don't tackle the volume of statement reconciliations they would like and still have a manual process in place. Team leaders are frustrated by the lack of coverage, and their teams are overwhelmed by a tedious manual task.
Let’s take a look at some of the most common blockers teams face and explore their solutions.
"We don’t have enough time"
We hear this one a lot, and it’s easy to see why. For teams reconciling statements manually and at high volumes, it can be an incredibly time-consuming task that doesn't fit within their day-to-day.
To combat this, many AP functions are investing in technological solutions that automate the whole process. This removes the tedious portion of the task and allows teams to simply review the results and report or action depending on the reconciliation.
"Our ERP system already ensures accuracy"
ERPs are powerful tools, but they can't do everything, including catching all supplier discrepancies. There are a few reasons for this.
First, ERPs rely on data input from multiple sources, and errors or inconsistencies can occur if the data entered is incorrect or incomplete.
Additionally, ERPs may not always capture complex issues that aren’t reflected in the system like price variances or hidden credit notes. They also typically follow predefined rules, meaning they might miss discrepancies that don’t fit into those patterns.
While ERPs might automate certain processes, they still depend on human oversight to identify and address issues that the system may not flag automatically. An additional set of controls can sit on top of your ERP to make up for these gaps.
"It’s not a priority"
Brushing off reconciliations as "not a priority" can quickly snowball into bigger headaches.
Small errors pile up and lead to missed payments, overspending and compliance issues. In turn these errors become even bigger problems by creating inaccurate reports and disrupting cash flow.
What seem like a tiny oversight initially can turn into a major financial mess.
"We have good supplier relationships, so they'll tell us if there's an issue"
Relying on suppliers to flag issues is a risky game. Not every vendor will catch discrepancies, and some might even hold back reporting problems to avoid conflict or protect their side. This leaves you in the dark, letting small issues grow into bigger problems.
If you rely on external suppliers to stay in control of your own financials, you open the door to overpayments, fraud or mistakes. By proactively reconciling statement reconciliations, you’ll spot errors and resolve them with your vendors before they become a larger issue.
"We only reconcile key suppliers"
Only reconciling key suppliers might seem like a time-saver, but it’s a shortcut that should be avoided.
Skipping smaller suppliers means letting discrepancies slip through the cracks, and those little differences can add up. If hidden fees, overpayments and errors are sneaking past in large quantity, even from “small” suppliers, it'll be reflected in your bottom line.
How businesses can reconcile more statements, in far less time
If your team is struggling to tackle a high volume of statements or you've already identified vendor statement reconciliation as a solution to financial loss, there’s a way to turn things around for your team.
First, implement a structured reconciliation process. Think of it like setting up a playbook for your AP team: regular checks, clear documentation and swift action on discrepancies. This keeps your financial reporting accurate and your payable ledger clean.
Next, embrace automation to cut down the manual grind. Automated tools can do the heavy lifting by matching invoices, flagging issues and integrating with your accounting system. This frees up your AP team to focus on building strong vendor relationships instead of getting bogged down in the weeds.
Lastly, use reconciliation insights for process improvement and to guide strategy. Dive into the data to spot spending trends and opportunities to improve cash flow. These insights help you make smarter financial decisions and optimise resource allocation.
How to build a business case to automate statement reconciliations
If you’ve come to the conclusion that it's time to rethink your statement reconciliation process, here are the next steps.
If you decide a technology is the answer, you'll need to build a solid business case as to why it'll elevate your process, and most importantly save the company money. Here's how you can approach it:
- Identify current pain points – Highlight the inefficiencies in your current process. Are manual reconciliations too slow? Are errors slipping through, leading to overpayments or compliance risks? Lay out the key challenges.
- Show the cost of doing nothing – Quantify the risks of sticking with the current approach. Missed discrepancies can lead to financial losses, compliance penalties or wasted employee time. What is this costing the company today?
- Demonstrate the ROI – Explain how an automated reconciliation tool can speed up processes, reduce manual workload and improve accuracy. Back it up with numbers such as how much time and money could be saved each month.
- Address common objections – Leadership may worry about cost, implementation time or integration with existing systems. Be ready with answers Many modern solutions integrate easily with ERPs, and the long-term savings far outweigh the initial investment.
- Present a clear plan – Outline how implementation would work, from vendor selection to rollout. Show that transitioning to an automated system won’t be disruptive but rather a seamless upgrade that delivers long-term value.
Putting together the right business case should be a joint effort. Choosing the right solution partner who understand your struggles and is aligned on your goals is vital to this.