Reconciling supplier statements

A supplier statement reconciliation proves that the balance a supplier says you owe agrees with the balance on that supplier’s account in your purchase ledger, or explains every difference. You start from the two closing balances at the same date, tick off matching invoices, credit notes and payments, and list what is left as timing differences or errors. Only errors need correcting; timing differences should clear on their own within days.

Why reconcile supplier statements at all?

The purchase ledger is built from documents you have received and processed. The supplier’s statement is built from what the supplier has issued and received. Comparing the two is one of the few routine checks that uses evidence from outside the business. ACCA’s FA1 article on the subject calls the supplier statement an important source document for verifying the data held about that supplier, and explains that poorly kept supplier accounts make errors harder to spot in both sets of records.

Auditors take the same view of external evidence. ISA (UK) 500, paragraph A35, says the reliability of audit evidence is increased when it is obtained from independent sources outside the entity. Where an auditor cannot get a direct confirmation of a payable, ISA (UK) 505, paragraph A19, lists alternative procedures including examining subsequent cash payments, correspondence from third parties and goods received notes. A file of reconciled supplier statements at the year end makes that work quicker.

The reconciliation sits alongside the purchase ledger control account check. The control account check proves that the ledger adds up; the supplier reconciliation proves that each balance in it is right. See sales and purchase ledger control accounts for the first of these.

Which suppliers should you reconcile, and how often?

Reconciling every supplier every month is rarely worth it. A practical approach:

Monthly, for the suppliers that make up most of the purchase ledger by value, and for any supplier on a payment plan or in dispute.
Monthly, for any supplier whose statement shows an amount you do not recognise or a balance going back more than one period.
At the year end, for every supplier with a material balance, so the creditors figure in the accounts is supported.
On a rotating sample basis for the rest.

If a supplier does not send statements, ask for one, or send your own remittance listing and ask them to confirm it.

How do you reconcile a statement step by step?

Use the same date. Run the supplier’s account in your purchase ledger to the statement date, not to today.
Agree opening position. If last month’s reconciliation was clean, start from the items that were left unmatched then.
Tick matching items. Match invoices by invoice number and amount, credit notes by number, and payments by date and amount. Mark each on both documents.
List items on the statement but not in your ledger. Usually invoices not yet received or not yet posted, or invoices you have never seen.
List items in your ledger but not on the statement. Usually payments made just before the statement date that the supplier had not yet received, or debit notes you have raised that the supplier has not accepted.
Classify each difference as a timing difference, an error in your records, or an error or disputed charge in the supplier’s records.
Prove the reconciliation. Ledger balance plus or minus each listed item must equal the statement balance exactly.
Act and evidence. Post your own corrections, raise queries with the supplier for theirs, and file the reconciliation with the statement, signed and dated by the preparer.

What causes the differences?

ACCA lists the usual causes: payments made but not yet received by the supplier, invoices posted to the wrong supplier account, credit notes not processed, debit notes not processed, discounts not accounted for correctly, and transposition errors when entering an invoice. In practice a few more come up regularly:

Duplicate invoices. A copy invoice sent as a reminder and posted a second time. The statement shows it once; your ledger shows it twice.
Missing invoices. Goods received and in use but the invoice is with a manager for approval. These should already be in a goods received not invoiced accrual at the month end.
Payments allocated to the wrong invoice. The total balance agrees but the supplier shows an old invoice as unpaid, which will eventually trigger a stop on your account.
Net and gross confusion. An invoice posted at the net amount instead of the VAT inclusive amount, or VAT calculated on a figure keyed incorrectly.
Charges you have not agreed. Late payment interest or recovery costs added by the supplier, or price increases not on the purchase order.

What does a worked reconciliation look like?

Illustration only. Your ledger shows £8,460 owed to a supplier at 30 June. The supplier’s statement shows £11,040.

Item	£
Balance per purchase ledger	8,460
Add: payment sent 29 June, not on statement (timing)	2,400
Add: invoice 7741 on statement, not received (query)	1,320
Less: invoice 7702 posted twice in our ledger (our error)	(600)
Add: invoice 7690 posted as £270 instead of £720 (our error)	450
Less: credit note 112 on statement, not yet posted by us (our error)	(990)
Balance per supplier statement	11,040

Check: 8,460 plus 2,400 plus 1,320 less 600 plus 450 less 990 gives 11,040. Three items are your errors and should be corrected now: reverse the duplicate, correct the transposed invoice and post the credit note. The payment is a timing difference and should appear on next month’s statement. Invoice 7741 needs a copy requested and checked against a delivery note before it is posted; if it relates to goods already received, it belongs in the month end accrual.

How do the differences affect VAT?

Each correction to a purchase invoice changes the input tax you have claimed. HMRC’s VAT Input Tax manual at VIT31200 explains that the right to deduct input tax depends on holding acceptable evidence, normally a VAT invoice meeting regulation 14 of the VAT Regulations 1995. A duplicate posting means input tax has been claimed twice on one invoice; a credit note not posted means input tax is overstated. Small corrections are normally picked up in the next return; larger ones follow the rules in correcting VAT errors.

Invoices that stay unpaid also have a VAT consequence. VAT Notice 700/18, section 4, says that if you do not pay for supplies within 6 months of the relevant date (the date of supply or, if later, the due date for payment), you must repay the input tax you claimed on them. Your supplier does not have to tell you, so you need to monitor this yourself. A supplier reconciliation that shows old disputed invoices is a prompt to check whether any input tax needs repaying, and the entitlement is restored if you later pay.

Who should prepare and review it?

Ideally the person preparing the reconciliation is not the person who approves payments. Supplier statements are a common route for invoice fraud and for duplicate payments: a statement showing an invoice you have never seen, or new bank details, should be checked directly with a known contact at the supplier before anything is paid. A reviewer should look at the size and age of unmatched items, not just whether the reconciliation balances. A reconciliation that balances because of a large unexplained “difference” line has not been reconciled.

What mistakes come up most often?

Reconciling to different dates. Comparing a statement at 30 June with a ledger run on 8 July builds in differences that are not real.
Paying from the statement. Paying the statement balance instead of approved invoices pays for disputed or unknown items and hides errors.
Leaving timing items to grow. A payment that is still unmatched two months later is not a timing difference; it may have gone to the wrong supplier or the wrong bank account.
Posting the supplier’s balance. Journalling your ledger to agree with the statement, without finding the items, simply copies the supplier’s errors into your accounts. Corrections should be made through proper journal entries with a reason recorded.
Not chasing missing credit notes. A supplier who agreed a credit on the phone may never issue it unless the reconciliation is followed up in writing.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.