Invoice Reconciliation
Definition:
Invoice reconciliation is the process of comparing and verifying the information on supplier invoices against corresponding purchase orders, goods receipts, and other relevant documents to ensure accuracy and consistency before processing payments. It involves checking for discrepancies in prices, quantities, terms, and other details, and resolving any issues with the supplier.
Example:
Acme Corporation's accounts payable team receives an invoice from Steel Suppliers Inc. for a recent purchase of raw materials. They pull up the corresponding purchase order and goods receipt in their system and compare the details line by line. They verify that the prices, quantities, and terms match the agreed-upon information, and check that the goods were received in satisfactory condition. If everything matches, they approve the invoice for payment; if there are discrepancies, they contact Steel Suppliers Inc. to resolve the issue before processing the payment.
Why is Invoice Reconciliation important?:
Invoice reconciliation is important for procurement and finance teams as it ensures that the organization only pays for goods or services that were actually ordered, received, and billed correctly. It helps prevent errors, fraud, or overcharges, and provides an opportunity to catch and resolve any issues with suppliers before making payments. Effective invoice reconciliation contributes to accurate financial reporting, strong supplier relationships, and overall financial control within the organization.