A vendor statement (or supplier statement/statement of account) is a formal accounting document that serves as a periodic check of the financial relationship between a buyer and a seller. It is a fundamental tool for maintaining accurate, synchronized records within a company’s Accounts Payable department. Regular exchange of this information ensures both parties agree on the current financial standing, preventing confusion and disputes.
Defining the Vendor Statement
A vendor statement is a summary document detailing all financial transactions between a client and a supplier over a specific time frame, typically a calendar month. The supplier issues this report to the client, providing a consolidated view of all activities, including purchases, payments, and adjustments made to the account balance. It functions as a historical record, showing the total outstanding amount on the client’s account as of the statement date. Its primary purpose is to summarize the account’s status, allowing the client to verify their internal ledger against the supplier’s records.
Key Components of the Statement
A standard vendor statement provides a clear, chronological narrative of the account’s activity during the reporting period. It establishes the financial position carried over from the prior month and then lists all new transactions that have influenced the account balance.
Opening Balance
The opening balance represents the total outstanding amount owed or credited by the client at the end of the previous statement period. This figure is the starting point for the current month’s reconciliation process and must match the closing balance from the preceding statement. If the figures do not align, it signals a discrepancy requiring investigation.
Invoices Issued
This section itemizes every invoice the vendor generated and sent to the client during the statement period. Each entry includes the invoice number, issue date, a brief description of the goods or services, and the specific amount due. This complete record allows the client to confirm that all purchases have been properly recorded in their internal system.
Payments Received
The payments received section details all remittances the vendor processed from the client within the statement window. This includes payment dates, reference numbers, and the amount of each payment applied to the account. Checking these against bank records confirms that the vendor has correctly credited all funds transferred by the client.
Adjustments and Credits
This section lists modifications to the account that are not standard invoices or payments, such as credit notes, debit notes, or sales returns. A credit note is issued when a client returns goods or receives a price reduction, lowering the amount owed. These entries ensure that all non-standard financial events are accounted for in the final balance calculation.
Closing Balance
The closing balance is the final amount the client owes the vendor at the end of the reporting period. This figure is derived by adding new invoices and subtracting payments and credits from the opening balance. This resulting figure becomes the opening balance for the following month’s statement.
The Primary Purpose of Vendor Statements
The core function of the vendor statement is verification and confirmation for both the buyer and the seller. It provides the client with an independent report to cross-check their Accounts Payable (AP) ledger against the vendor’s Accounts Receivable (AR) records. This mutual confirmation process is designed to catch errors, such as missing invoices or unrecorded payments, before they lead to payment delays or disputes.
This periodic review maintains accurate financial hygiene and strengthens the supplier-client relationship. When both parties agree on the precise amount of debt owed, trust in the transaction system is reinforced. Regular reconciliation minimizes the chance of double payments or late fees arising from mismatched records. It supports long-term, reliable supply chain operations by demonstrating a commitment to transparency.
Vendor Statement Versus an Invoice
A vendor statement and an invoice serve different, though related, accounting functions. An invoice is a transactional document that acts as a formal demand for payment for a single order of goods or services rendered. It is created and sent immediately upon the completion of a sale, specifying the exact amount due and the payment terms for that specific transaction.
The vendor statement is a summary report that consolidates the activity of many transactions over an extended period. It provides an overview of the account’s historical status and current standing, rather than demanding immediate payment for the total balance. While an invoice focuses on a single sale, the statement provides the context of the running balance, listing multiple invoices, payments, and adjustments.
Practical Steps for Statement Reconciliation
Statement reconciliation is the systematic process an Accounts Payable (AP) team uses to compare the vendor’s statement against the company’s internal ledger. The initial step involves verifying the statement’s opening balance against the closing balance from the previous month in the company’s records. Any discrepancy must be resolved first, as it indicates a historical error.
The team then cross-references every item listed on the vendor statement against the corresponding entry in the AP system. Each invoice number, credit note, and payment reference must be checked to confirm it exists and matches the recorded amount and date. This process often uses a three-way match concept, ensuring the invoice matches the internal purchase order and the receiving document.
Items on the vendor statement not found in the client’s system, such as a missing invoice, should be immediately flagged. Payments recorded in the client’s system but absent from the vendor’s statement must also be investigated. This often requires providing the vendor with proof of payment, such as a bank transfer receipt. These discrepancies are typically documented on a reconciliation report.
Discrepancies often include timing differences, where a payment was sent but not yet processed, or unrecorded credit notes for returned goods. The AP team must follow up with the vendor’s Accounts Receivable department to clarify each flagged item and supply documentation to correct the records on both sides. Successful reconciliation concludes when the final closing balance on the vendor statement matches the outstanding balance in the company’s internal AP ledger.