How To Reconcile Accounts Payable?

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Although the process of learning how to reconcile accounts payable is relatively simple, one can get to know how this process is done by going through the following steps:

Reconciling the accounts payable is a critical procedure that has to be performed by any company to check if the accounts payable register is correct and corresponds to the actual amount of money that a company is owed. Failure to do the AP reconciliation could result in issues such as making duplicate payments, accrual of sundry charges for unpaid bills, or even over-statement of the AP balance in the company’s financial statement.

The following is a list of the steps that one needs to follow to accomplish the accounts payable reconciliation process.

1. Accountpayable Transaction Record Compilation

The first procedure to follow in the task is to compile a list of all the records of all the APs and the transactions made for the relevant period. Almost every company has its AP sub-ledgers in which all the unpaid supplier invoices are captured together with other papers such as checks and payments. You will need to gather:

- Output 1: Digital and scanned copies of all unpaid supplier invoices for the month
- The A/P sub-ledger general ledger report for the period up to and including month-end
- Cheque payment lodgments and remittance advice documentation for the month
- The bank statements and cleared checks for the month
- Credits from suppliers such as the AP or debit memos from the suppliers.

The good thing is that all these records will be in one place which will simplify the reconciliation process.

2. Match Payments to Invoices

Next, begin to associate the check payments which has been disbursed with the unpaid invoice that the payment was made to. If you used a lot of checks to make payments in the month, you can retrieve the electronic images of the remittance advice records that indicate which invoices were being paid.

As a result of this process, you can use a highlighter to mark invoices in the sub-ledger that have been paid according to your record. It will provide you with the ability to gradually balance down the sub-ledger balance.

3. Investigate Unpaid Invoices

Thus, after the matching of payment, there could still be open invoices to appear as outstanding balances in the aged AP sub-ledger for the specific month. Log in to your organization’s digital environment and pull up each of these digital supplier invoices one at a time to examine them. Check:

- Did this invoice exist and was it valid when received? Verify it.
- Have you already made this invoice, for example, by using a credit card or other means?
- Is there a possibility that this invoice is in the system in one form or the other?
- Is this invoice amount consistent with the receipt records that we have been maintaining?

This may be done by conducting a detailed search on each unpaid invoice left in a bid to realize they can indeed be erased or considered as paid. Update the records of the subledger which correspondingly has to be modified.

4. Discuss Discrepancies with Suppliers

There is still the possibility that there are outstanding supplier invoice errors not yet offset against your payment information. Get in touch with such suppliers personally to know whether they have any outstanding invoices or balances. Make sure to check:

- They should reveal any open invoice from their side that you never saw
- In case you discover that they made payments sent that you never received or perceived.
- The differences in the amount stated on the invoice or the payment received by the vendor.

This way, in discussing these issues directly with the suppliers, you can close the account of the last AP transactions of the month.

Performing this 4-step AP reconciliation process each month will help ensure that your accounts payable sub-ledger is balanced and actual. This can help avoid future difficulties and maintain proper accounting of the figures and amounts in payables that are due. Make sure that account payable reconciliation is among the usual routines that firms undertake under the GAAP accounting rules.

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