Statements of account: the forgotten goldmine in balance reconciliation

Of all the techniques in a recovery audit, one surprises clients every time: balance reconciliation through statements of account. The principle is simple: you ask your suppliers for an overview of your own position in their books. What comes out often appears nowhere in your own records: open credit notes, prepayments that were never offset and credit balances that have sometimes been in your name for years.

How do hidden credits with suppliers arise?

• A credit note is promised and booked by the supplier, but never sent or never processed on your side.
• A prepayment or deposit is not settled after the contract ends.
• A duplicate payment is neatly booked by the supplier as a credit balance, but nobody reports it.
• Returns and quality claims are settled commercially without being closed financially.
• When a supplier changes or a contract ends, a residual balance remains because both parties close the file.

Why your own records do not show this

All these items have one thing in common: in your own records nothing is outstanding. No receivable was booked, so there is nothing to monitor. Only the supplier's records show the balance, and the supplier has no incentive to report it actively. Balance reconciliation reverses that information asymmetry.

How to set up balance reconciliation

1. Select the suppliers: start with the top 100 by spend plus all suppliers whose contracts ended in the past three years.
2. Send a standardised request for a statement of account as at a fixed date, quoting your customer number with the supplier.
3. Reconcile the statements received line by line against your own vendor ledger; every difference is a point to investigate.
4. Reclaim any credits found or offset them against open invoices.
5. Repeat the exercise every year for the largest suppliers; response and yield increase as suppliers get to know the process.

In practice: response is the bottleneck

The biggest challenge is not the analysis but the response: suppliers react slowly or incompletely to balance requests. In our audits we solve this with a structured follow-up process and by sending the request on behalf of the client with a clear, short question. Experience shows that it is precisely with the largest suppliers, with the most transactions, that the chance of a hidden credit is greatest and the conversation goes most smoothly.