How often do you get the accounts of suppliers/customers reconciled ? What policies do you observe to ensure effective accounts reconciliation ?

As often as weekly, we reconcile the accounts especially for companies with high volume of transactions because due dates vary. Managers should visit aging analysis regularly so as to prevent accounts piling in long outstanding, moreso if this is due to inefficiencies on our part such late invoicing and late delivery of invoices.

Two things to reconcile are:

1. Check if the total amount of subsidiary ledgers of  each supplier and customer reconciles with the general ledger amount (AP/AR)

2. Our records versus customer/supplier records

Reconciliaiton:

1. Check if the total amount of subsidiary ledgers of  each supplier and customer reconciles with the general ledger amount (AP/AR)

If there is a difference, it may be caused by not recording a corresponding entry on a supplier/customer ledger upon entry in GL account AP/AR

Prevention: Check system controls. It should not allow posting in GL AP and AR without assigning a supplier or customer

2. Our records versus customer/supplier records

We should make a confirmation of our records with the concerned party (supplier/customer)

If a difference occur, you may do these steps:

(1) Send a statement of accounts to the client detailing the date, invoice number and amount

(2) Either of you can do the reconciliation from there, but since we should be on the aggressive part (since it is a receivable, the other party may want to delay reconciliation and payment), we could also get a listing from them of their payables to us.

(3) After identifying the invoices that were included in one party and not included in the other party, the reasons should be communicated to them.

   Reasons may be:

    a. Discounts

    b. Invoices not received by client (in-transit or missing)

    c. Non-recording of invoices by the client

    d. Disputed items

4. Close the issues with the party concerned. Sometimes there will be negotiations.

Same may be followed with supplier accounts, but we are more concerned with the accounts receivables because higher receivables mean that our working capital is stocked up. But we should not neglect settling our accounts payables to maintain healthy supplier relationships. We monitor accounts receivables and accounts payable using the Aging Analysis. 

Every10th,20th and27th of the month '"The age-wise classification Report is taken. (Usually our credit period ranges from60 days ton90 days). The Overdue accounts will be meticulously followed up.  A the beginning of Every month--Account statement will be sent to the Customer accounts (With perfect notes for the overdue amounts and other discrepancies as foot-notes) and hand delivered to the concerned departments --in otherwise cases scanned and e-mailed.  from5th to15th follow up over phone at least2 times in case of problem accounts. After15th personal visit by our collection representative.

In case of suppliers--no delay not even a single day--unless under exceptional cases for want of some genuine details.