Record to report / R2R – Reconciliations

Vendor

We discussed in good detail on customer reconciliations in the last few posts.

Very similar to customer reconciliations are the vendor reconciliations. Technically, vendor reconciliations are a part of an AP / Accounts payable process, but a large number of companies actually execute this as a part of record to report / R2R.

Most of the reasons leading to reconciliations are very similar to customer reconciliations:

  • Difference in rates
  • Promotions not affected in billing
  • Debits on account of interest / penalties charged by your client, but not entered in the customer’s books.
  • Differences in transportation and freight
  • Disputes for different charges / credits
  • Returned material
  • Unaccepted / unapproved services
  • Billing errors

Again, these reconciliations gain criticality because they can lead to instances which can save delayed payment penalties and discounts on early payments. In one of my processes we did an exercise on this while doing the reconciliations and saved half a million dollars for this US based company in a span of six months. Yes this activity was bundled with an analysis of the vendor invoice payment terms as well and almost 40% of the total savings came from clearing the reconciliation items, where penalties were negotiated with vendors and a waiver taken from them. Procedures were created to give confidence to vendors that all payments would be made in time, as per pre-informed / agreed terms.

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