Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →
The balance a supplier says you owe does not match your ledger, and payments or disputes stall.
Start from the balance per your books, add or subtract each item recorded on only one side, such as unbooked invoices, payments in transit, credit notes and TDS, and arrive at the balance per the supplier's statement.
A monthly or quarterly schedule by supplier priority, a standard request for the statement of account, and a reconciliation template with add and less sections.
Every supplier balance explained, with missing entries booked and genuine disputes listed for follow-up.
Vendor reconciliation means comparing your ledger balance for a supplier with the supplier’s own statement of account, invoice by invoice. The aim is to find bills you have not booked, payments the supplier has not recorded, credit notes on one side only, TDS differences and timing gaps before you pay or close the books.
What does a vendor reconciliation statement look like?
The standard layout starts with your balance and walks to theirs:
| Line | Example |
|---|---|
| Balance payable per our books | ₹ |
| Add: invoices in the vendor’s statement not yet booked by us | ₹ |
| Add: payments we made that the vendor has not yet credited | ₹ |
| Less: credit notes issued by the vendor that we have booked but they have not | ₹ |
| Add or less: TDS we deducted but the vendor has not adjusted | ₹ |
| Balance per vendor’s statement | ₹ |
The signs depend on which side is missing the entry. A simple rule: ask “what would the vendor need to do, or what would we need to do, for the two balances to agree?”
A worked example
On 30 September your ledger shows ₹2,85,000 payable to a packaging supplier. The supplier’s statement shows ₹3,12,500.
Matching line by line, you find two items:
- An invoice for ₹40,000 dated 29 September is in the supplier’s statement but not in your books. The courier copy reached your office on 3 October.
- A credit note for ₹12,500 dated 30 September, issued by the supplier for damaged cartons, is in the supplier’s statement but not yet booked by you.
| Line | Amount |
|---|---|
| Balance payable per our books | ₹2,85,000 |
| Add: invoice dated 29 September not yet booked by us | ₹40,000 |
| Less: credit note dated 30 September not yet booked by us | ₹12,500 |
| Balance per vendor’s statement | ₹3,12,500 |
Check: ₹2,85,000 + ₹40,000 = ₹3,25,000. Then ₹3,25,000 − ₹12,500 = ₹3,12,500, which is exactly the supplier’s figure.
Both items are missing on your side, so you book the ₹40,000 invoice and the ₹12,500 credit note in September, along with the GST on each. Your corrected balance becomes ₹3,12,500.
Watch the direction of each item. If instead you had paid ₹12,500 on 30 September and the supplier had not yet credited it, the supplier’s balance would be higher than yours, and the item would be added, not subtracted. Every reconciling item must be explained by a document, and the arithmetic must land exactly on the other party’s figure.
How often should you reconcile vendors, and which ones first?
Most teams reconcile in this order:
- Largest balances, because errors there cost the most.
- Registered micro and small (MSME) suppliers, because the MSMED Act, 2006 limits payment to 45 days at most, and late payment can affect your tax deduction under Section 43B(h).
- Suppliers in dispute, or where the supplier has sent a reminder.
- Suppliers with TDS, so certificates and ledgers agree.
- Everyone else, at least quarterly and at 31 March.
What should you ask a vendor to send?
- Statement of account for the period, showing opening balance, every invoice, credit note and payment, and closing balance.
- List of GST invoices issued to your GSTIN, which you can also compare with your GSTR-2B.
- TDS acknowledgment, where you deducted TDS, so the supplier adjusts their ledger for the amount you deposited on their behalf.
What to read next
- Why the vendor statement differs from our ledger lists the most common causes of a gap.
- Debtors and creditors reconciliation in India covers the full monthly routine.
- Vendor GSTR-1 follow-up letter templates helps when a supplier’s invoices are missing from your GSTR-2B.
- For reconciling supplier balances and TDS together, see account reconciliation software India.