How do you reconcile accounts receivables/payables?

Reconciling Accounts Receivables and Payables

When it comes to reconciling your Bank accounts, the process is fairly straightforward. You have the independent bank statement provided by the bank, which serves as an external reference to compare your own records against.

However, with accounts payables and receivables, what external documents can you rely on for reconciliation? Let’s explore the options available.

Reconciling accounts receivables and payables is a critical part of maintaining accurate financial records. Unlike bank reconciliations, where a bank statement serves as an independent and external document for comparison, reconciliation of receivables and payables involves matching internal records against external documentation provided by your customers and suppliers.

Steps to Reconcile Accounts Receivables/Payables

1. Gather Internal Records

Accounts Receivables: Start by gathering your company’s sales ledger or accounts receivables ledger that lists all invoice amounts that customers are expected to pay.
Accounts Payables: Collect your purchase ledger or accounts payables ledger where all the amounts you owe to suppliers are recorded.

2. Obtain External Documents

Accounts Receivables:
Customer Statements: These are periodic statements sent by your company to its customers detailing their account balance. While your company sends these out, the reconciliations are confirmed back by the customers, often in the form of payment or a remittance advice.
Remittance Advice: When customers make payments, they often send remittance advices detailing which invoices are being paid. These can be used to cross-reference against your records.
Customer Correspondences: Emails or communication logs discussing the account status, payment promises, or disputes can also serve as support documents.
Accounts Payables:
Supplier Statements: These are statements sent to your company by suppliers, detailing what your company owes them. These should align with your outstanding balances recorded in the payables ledger.
Invoices: Ensure that all invoices from suppliers are accounted for and that none are missing. If discrepancies occur, these invoices serve as evidence.
Credit Notes: Sometimes, suppliers issue credit notes for returned goods or agreed-upon discounts. Make sure these are accurately recorded and match the supplier’s statement.

3. Perform the Reconciliation

Accounts Receivables:
Compare your receivables ledger with customer remittance advice and any payment confirmations.
Investigate any discrepancies such as missing payments, unidentified credit notes, or unapplied cash receipts.
Adjust your records for any errors found, ensuring that any adjustments are fully documented and retraceable.
Accounts Payables:
Match your recorded payables against supplier statements to ensure all invoices and transactions are accounted for.

One response

APAdmin

25 February 2025 at 8:05 PM
Reconciling accounts receivables and payables is a critical part of maintaining accurate financial records. Unlike bank reconciliations, where a bank statement serves as an independent and external document for comparison, reconciliation of receivables and payables involves matching internal records against external documentation provided by your customers and suppliers.

Steps to Reconcile Accounts Receivables/Payables

1. Gather Internal Records
- Accounts Receivables: Start by gathering your company’s sales ledger or accounts receivables ledger that lists all invoice amounts that customers are expected to pay.
- Accounts Payables: Collect your purchase ledger or accounts payables ledger where all the amounts you owe to suppliers are recorded.
2. Obtain External Documents
- Accounts Receivables:
- Customer Statements: These are periodic statements sent by your company to its customers detailing their account balance. While your company sends these out, the reconciliations are confirmed back by the customers, often in the form of payment or a remittance advice.
- Remittance Advice: When customers make payments, they often send remittance advices detailing which invoices are being paid. These can be used to cross-reference against your records.
- Customer Correspondences: Emails or communication logs discussing the account status, payment promises, or disputes can also serve as support documents.
- Accounts Payables:
- Supplier Statements: These are statements sent to your company by suppliers, detailing what your company owes them. These should align with your outstanding balances recorded in the payables ledger.
- Invoices: Ensure that all invoices from suppliers are accounted for and that none are missing. If discrepancies occur, these invoices serve as evidence.
- Credit Notes: Sometimes, suppliers issue credit notes for returned goods or agreed-upon discounts. Make sure these are accurately recorded and match the supplier’s statement.
3. Perform the Reconciliation
- Accounts Receivables:
- Compare your receivables ledger with customer remittance advice and any payment confirmations.
- Investigate any discrepancies such as missing payments, unidentified credit notes, or unapplied cash receipts.
- Adjust your records for any errors found, ensuring that any adjustments are fully documented and retraceable.
- Accounts Payables:
- Match your recorded payables against supplier statements to ensure all invoices and transactions are accounted for.
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