Version 1.0
Prepared by: @Lorraine Sebata
Approved by: @Marcia Wilkinson
Reviewed date: 2025-09-13
Next review date: 2026-09-12
This Standard Operating Procedure (SOP) for Vendors Reconciliation is designed to ensure the accuracy and completeness of vendor accounts. Its purpose is to establish a systematic process for comparing the company's accounts payable records with vendor statements, identifying and resolving discrepancies, and maintaining healthy vendor relationships. This SOP helps in preventing payment errors, optimizing cash flow, and ensuring compliance with financial reporting standards.
This SOP applies to the Accounting Team members responsible for managing accounts payable and performing periodic reconciliations of vendor accounts for all goods and services procured by Easyterms.
Accounting Team Member: Primarily responsible for performing vendor reconciliations, identifying discrepancies, communicating with vendors, and preparing reconciliation reports.
Vendors: Provide statements of account and cooperate in resolving discrepancies.
Management Team: Reviews and approves reconciliation reports and authorizes necessary adjustments or actions.
5.1.1 At the end of each month (or as per agreed frequency with key vendors), request statements of account from all active vendors with outstanding balances or significant transaction volumes.
5.1.2 Prioritize obtaining statements from vendors with whom there are frequent transactions or large balances.
5.1.3 Store all received vendor statements in a designated digital or physical folder for easy access.
5.2.1 Log into the Accounting Software (Xero).
5.2.2 Generate an 'Accounts Payable Aging Report' or a 'Vendor Transaction Detail Report' for the reconciliation period from Xero.
5.2.3 Export the report to Excel for easier comparison and analysis. Ensure the report includes all relevant details such as invoice numbers, dates, amounts, and payment dates.
5.3.1 Compare the vendor statement with the corresponding Accounts Payable report from Xero line by line.
5.3.2 Identify and note down all matching transactions (invoices and payments).
5.3.3 Investigate and identify all discrepancies, which may include:
Invoices recorded by the vendor but not in Xero.
Invoices recorded in Xero but not on the vendor statement.
Payments made by the company but not reflected on the vendor statement.
Payments reflected on the vendor statement but not recorded in Xero.
Differences in invoice amounts or dates.
Credit notes or debit notes not applied by either party.
5.3.4 For each discrepancy, determine the root cause (e.g., missing invoice, incorrect entry, payment in transit, unapplied credit).
5.4.1 For discrepancies originating from the company's side (e.g., missing invoice entry in Xero), make the necessary adjustments in Xero, ensuring proper documentation and approval as per the Accounts Payable Policy.
5.4.2 For discrepancies originating from the vendor's side (e.g., unapplied payment, incorrect invoice amount), contact the vendor promptly via email or phone.
5.4.3 Provide the vendor with clear details of the discrepancy and supporting documentation (e.g., proof of payment, copy of correct invoice).
5.4.4 Follow up with the vendor until the discrepancy is resolved and reflected in their next statement.
5.4.5 Document all communication with vendors regarding discrepancies, including dates, names, and resolutions.
5.5.1 After resolving discrepancies, prepare a 'Vendor Reconciliation Report' for each reconciled vendor.
5.5.2 The report should include:
Vendor Name
Reconciliation Period
Opening Balance (as per Xero and Vendor Statement)
Total Invoices (as per Xero and Vendor Statement)
Total Payments (as per Xero and Vendor Statement)
Closing Balance (as per Xero and Vendor Statement)
A detailed list of all identified discrepancies and their resolution status.
Any necessary adjustments made in Xero.
5.5.3 Submit the reconciliation reports to the Management Team for review and approval.
5.6.1 Once the reconciliation reports are approved by management, ensure all necessary adjustments have been made in Xero.
5.6.2 File the approved Vendor Reconciliation Report, vendor statement, and all supporting documentation (including communication records) in the designated digital or physical archive.
5.6.3 Ensure all records are retained as per the Financial Record Keeping Policy for audit purposes.
Vendor Statements of Account
Accounts Payable Aging Report (from Xero)
Vendor Transaction Detail Report (from Xero)
Vendor Reconciliation Report (Internal template)
Email/Communication Logs with Vendors
Adjustment Vouchers/Approval Forms
All Accounting Team members involved in vendor reconciliation will receive mandatory training on this SOP and related policies annually or upon significant revisions.
This SOP will be reviewed annually by the Accounting and Finance Departments to ensure its continued effectiveness, compliance with financial policies, and alignment with business objectives.