7 Best Practices & Tools To Help With Reconciliation Of Accounts Payable
Updated: Oct 17, 2022
Keeping accurate financial statements is one of the most important aspects of running a business. To do this, you’ll need to do regular reconciliation of accounts payable (AP).
AP reconciliation ensures that your financial records are accurate and reconciled on a monthly basis.
It’s an essential process, but it can also be a bit time-consuming and complicated to manage. This is why you need to use the right tools to simplify the process.
The good news is that AP reconciliation can actually be incredibly simple as long as you follow the right practices.
Follow our guide to find out how to do this.
What is Accounts Payable Reconciliation?
Exactly as it sounds - it is the process of reconciling your AP. It checks that the amount of accounts payable that has been recorded in the balance sheet is correct.
This process is done before closing the books at the end of each accounting period (or month-end as it is commonly referred to in the accounting world).
The AP department performs a reconciliation by checking and verifying the total of all AP amounts outstanding and makes sure this matches the AP balance. This is done by looking at the payables account balance in the general ledger.
AP reconciliation involves a number of steps, namely reviewing accounts, recording their information, and reconciling them.
If any errors are identified, they are corrected and a reconciliation document is updated in the reporting periods that follow.
If you want to finalise your accounting data for the previous period, then you’ll need to make sure that all of your records are correct and have been maintained.
AP reconciliation reviews all of the necessary information to make sure everything has been properly recorded.
Accounts Payable Reconciliation Best Practices and Tools
Staying organised is essential for accurate AP reconciliation.
Here are a few tips and tools to help you with effective AP reconciliation.
Use Accounts Payable Automation
Automation is by far the easiest way to achieve a more accurate AP process without wasting any time.
Basically, you use an automation tool to put all of your time-consuming AP tasks on autopilot.
These tools automatically check that your data is correct, and they make sure that there is no missing data, or that no incorrect data is added to your spreadsheets.
Automation also makes sure that AP is constantly updated. That way, you won’t miss any invoices or payments.
By using AP automation, you’ll be able to streamline all of your AP processes. So when the time comes at the end of the month to reconcile and close your books, you’ll be working with more accurate and up-to-date information.
Record Petty Cash Transactions
Don’t forget that all transactions made using petty cash need to be carefully recorded. Any missing records here will throw your accounting records off and cause an issue during reconciliation.
Petty cash is an area that can be easily overlooked, so it's essential to properly record all of these transactions.
Review All Statements
Make sure to check all statements when you reconcile. Look at your balance sheet, your profit and loss statement, and your general ledger.
All of these need to be correct and up to date.
This may seem obvious, but staying organised is key to an accurate and efficient AP department. When you finalise your accounts, you should have all of your receipts and records carefully organised. This makes it much easier to update your AP to a document once the invoices have been paid.
By using the right expense tracking software, you’ll be able to keep and manage all of your receipts and invoices in one place.
Sweep is an expense tracking app for AP automation.
It’s the easiest way for businesses, freelancers, and startups to manage their expenses without a lot of effort. The app securely connects to your accounts, and can manage, track, and generate your expense reports in seconds.
Not only does this save you a lot of time, but it makes AP far more accurate and efficient. Sweep’s automated expense tracking means that all of your information will be easily accessible and properly managed.
With this real-time expense categorisation and management, reconciling your expense reports couldn’t be more efficient.
Standardised processes ensure that the reconciliation of AP is always done systematically. This is especially important when you automate this process, because you need to make sure the automation tool is doing what it's supposed to do.
Before you start automating or speeding up the reconciliation of AP, make sure that you have a solid standardised framework in place for the process.
Prioritise Invoices in Order of Their Due Dates
One of the best practices for AP is to pay invoices as they come in. You have to prioritise bills based on their due dates and their specific payment terms.
By ensuring that all of your invoices are carefully arranged in order of their due dates, you’ll be in a far more organised position when it comes to the reconciliation of AP. This makes the process easier to compare statements and invoices to ensure that there are no errors.
If you want your AP department to run smoothly, you’ll need a solid AP and expense tracking process. If done manually, this can take up a lot of time and effort. Luckily, there are tools and techniques that can help you to optimise this process.
By making use of an expense tracking app like Sweep, and following the AP best practices above, your reconciliation process will be far more efficient.
You’ll save time and effort while having a more accurate accounting system in place.
When you finalise your accounts at the end of each accounting period, you’ll be very grateful that everything matches up perfectly!