How to reconcile accounts payable against the ledger and vendors

Run the AP aging report as of the last day of the period and note the total. Then look up the closing balance of the accounts payable control account in the general ledger for the same date. The two figures should be equal.

If they are not, the usual causes are manual journal entries posted straight to the AP account, bills dated in one period but posted in another, and payments recorded in the bank but not applied to a bill. Filter the general ledger detail for entries that did not come from the AP module. In most systems, those are the first suspects. Fix them before you move on to vendors, because vendor balances only make sense when the subledger itself is right.

Timing is the other common cause. If bills are entered after the period is closed but dated inside it, the aging report run today will not match the general ledger balance you reported last week. Run both reports from the same snapshot, or lock the period before you reconcile, so you compare like with like. Write down the two totals, the difference and the date you ran them at the top of your working file, so a reviewer can repeat the check later.

Ask your largest vendors and any vendor with unusual activity for a statement as of the period end. Many vendors send them monthly anyway. A statement lists invoices issued, payments received and credits, with a closing balance.

You do not need to reconcile every vendor every month. A common approach is to cover the top vendors by spend monthly, plus any vendor with a disputed item, a credit balance or a change in bank details, and rotate the rest quarterly. Keep a simple log of which vendors were reconciled and when.

Statements arrive in many shapes: PDF attachments, portal downloads, spreadsheets. Save them in one folder per period with a consistent file name, such as vendor name and period end. That habit sounds small, but it is what lets an auditor or a new team member find the support for any balance in a minute rather than an afternoon. If a vendor cannot send a statement, an export of their open items or a confirmation email of the balance works as support too.

For each vendor, line up their statement with your vendor ledger. Match invoices by invoice number and amount, then payments by date and amount. Tick what agrees on both sides.

What remains usually falls into a few groups.

• Invoices on the vendor statement that you have not recorded: lost in email, waiting for approval, or never received.
• Payments you sent that the vendor has not recorded yet, typically made in the last days of the period.
• Credit notes the vendor issued that you have not applied, or that you applied and the vendor did not.
• Amount differences from pricing, discounts, freight or tax.
• Duplicate invoices recorded twice in your system, sometimes once from a PDF and once from a portal.

As an illustration, say the vendor statement shows a balance of $18,400 and your ledger shows $12,750. You find an unrecorded invoice of $3,900, a payment of $2,000 the vendor has not posted yet, and a credit note of $250 you never applied. Recording the invoice and applying the credit brings your side to $16,400. The vendor's side, less the payment in transit, is also $16,400, so the account agrees and the payment stays on your list of timing items until the next statement.

Accounts payable is where duplicate payments happen, and a reconciliation is the cheapest place to catch them. Look for bills from the same vendor with the same amount within a short window, the same invoice number with different formatting, and payments made both by check and by transfer.

Also review the aging. Debit balances on vendor accounts usually mean an overpayment or an unapplied credit, and that money can often be recovered. Bills older than 90 days without a dispute note deserve a question, because they may already be paid under a different reference.

Change of bank details is the other red flag worth checking here. If a vendor's payment details changed during the period, confirm the change through a known contact before the next payment run, not by replying to the email that announced it. Payment fraud often starts with exactly that kind of message, and the AP reconciliation is a natural moment to review recent changes.

Record missing invoices in the correct period, apply credits, reverse duplicates and correct misposted amounts. Each correction should reference the vendor statement or the document that supports it.

Then prepare a short reconciliation summary for each account: AP aging total, general ledger balance, the list of reconciling items with explanations, and the vendors reconciled this period. A reviewer signs off, and the file goes into the close binder. The month end close checklist shows where this fits in the wider close.

Keep the summary short enough that a reviewer reads it in a few minutes. Long lists of tiny items usually mean the matching is not finished yet, not that the account is unusually complex.

Over time, the reconciling items themselves become useful data. If the same vendor shows unrecorded invoices every month, the problem is how their invoices reach you, not the reconciliation. Fix the intake, for example a dedicated AP mailbox or a portal export, and the list shrinks for good.

Matching statements to ledgers by hand is slow because vendor references rarely match exactly. One vendor writes INV-00482, your system stores 482. Reconciles reads vendor statements and your AP export, normalizes references and payee names, matches invoices and payments one to one, one to many and many to one, and flags duplicates and amount differences in the exceptions queue.

Each match shows a reason and a confidence score, and nothing posts to your ledger without review. The same engine handles the bank side of payments, so you can check that every payment on the vendor ledger cleared the bank. See bank reconciliation software and the general ledger reconciliation software page for the related reconciliations, and the NetSuite and QuickBooks pages for the exports Reconciles reads.