The business challenge

As a business, you procure products and services from external suppliers. The supplier maintains a record of what they have supplied to your business, and issues invoices to you. Based on the invoices, the supplier makes claims for payment. You also maintain records of what you have procured from the suppliers, what they have delivered and what you agreed to pay for services. In theory, your records and the supplier’s records should match, but often they do not. This can happen for a number of reasons, for example,

• Timing differences: the supplier has raised a valid invoice on their statement, but you have not yet processed it on your system.

• Documents missing: an invoice may not have reached you, or got lost.

• Human error: the supplier may have billed you in error for something that was not delivered, or you may have accidentally captured an invoice to the wrong supplier account.

• You may have made a payment which they have not captured on their system.

The Procure-to-Pay process is susceptible to fraud, theft and abuse in many businesses, and therefore requires oversight. It is an area which auditors pay significant attention to. Well-defined and disciplined processes in this business area contribute to having clean audits and high confidence levels from stakeholders.

What is a Vendor Reconciliation?

The Vendor Reconciliation is a part of the Procure-to-Pay process in the supplier-customer relationship. As a business, it allows us to:

• Confirm that invoices presented by suppliers are valid charges for goods and services provided to the business.

• Compare the suppliers’ claims for payment against your own record of what is due.

• Base our decision of how much to pay to each supplier on objective facts.

The process is typically performed at least once a month for each active supplier, by an Accounts Payable administrator.

Why every business should perform the vendor reconciliation process

• Extract the unsettled invoices for the supplier from your creditors ledger.

• Using the creditor’s statement, tick off the transactions which match your ledger - where the document number and amount on the statement matches exactly with the external document number and amount in your ledger.

• Identify transactions appearing on the creditors statement, which are missing from your ledger. Mark these as reconciling items on the statement.

• Identify transactions appearing on your ledger, which are missing from the creditors statement. Mark these as reconciling items on your ledger.

• Identify transactions which appear on the statement and the ledger, but amounts differ.

• Create a reconciliation of the amount owing:

• Creditor balance as per your ledger.

• Plus documents on statement missing from your ledger.

• Minus documents your ledger missing from the statement.

• Plus the difference on transactions between ledger and statement.

• For the transactions which match, record any applicable deductions, for example rebates, or due to disputes.

• Calculate the amount owing for matching documents, less deductions.

• Process a payment to the creditor.

The Braintree Vendor Reconciliation for Business Central

Instead of performing reconciliations manually, or on Excel, you can make use of the Vendor Reconciliation module of Business Central. This allows you to record the supplier’s statement on the system, against your ledger entries. After matching the creditors statement transactions against the business’s records, you can;

• Make a decision on the amount to be paid to the creditor.

• Make deductions from the payable balance - for example, to cover damages, recover rebates etc.

• Process a payment to the creditor.

• Print a remittance advice, detailing the transactions being settled.

• Print a reconciliation between the balance stated by the creditor and the balance as per the business’s creditors ledger.

Process Overview