Your sales ledger says a customer owes £12,480. The customer’s accounts team says they owe £7,980. Both may be “right” from their own records, and until the two are reconciled neither side will pay or chase with confidence. Customer statement reconciliation is the exercise of agreeing the balance item by item.
It is the mirror image of reconciling a supplier’s statement against your purchase ledger, and it is most useful for large customers, customers who pay part of what they owe, and any account where payments and invoices have stopped lining up.
When to do it
- When a customer disputes your statement or a reminder.
- When a customer sends a statement of their own, or a remittance that does not match your open items.
- Every quarter for your largest customers, by agreement with their accounts team.
- Before the year end for any material balance, so the debtors figure in the accounts is supportable.
- Before you write off or provide against a debt.
Start from an open-item statement
Statements come in two styles. A balance-forward statement shows last month’s balance, this month’s movements and a new balance. An open-item statement lists each unpaid invoice, unallocated payment and credit note. For reconciliation you need the open-item version, because differences are about individual documents.
Working through the differences
Put your open items and the customer’s open items side by side, sorted by invoice number. Tick everything that agrees. What is left falls into a handful of categories:
| Difference | Typical cause | Who acts |
|---|---|---|
| Invoice on your ledger, not on theirs | Lost in their inbox; sent to the wrong address; awaiting approval or a missing PO number | You re-send, with the PO if needed |
| Payment on their list, not on yours | Payment in transit; received but allocated to another customer; sent to an old bank account | You trace the receipt |
| Credit note on yours, not on theirs | Not sent or not processed | You re-send |
| Credit or deduction on theirs, not on yours | They have deducted a disputed amount, a discount or a rebate | Agree whether you will issue a credit note |
| Amount differs on one invoice | Price dispute, part delivery, wrong VAT | Agree the correct figure; credit and re-invoice if needed |
| Their payment covers invoices you show as unpaid | Payment allocated against the wrong invoices on your ledger | You reallocate |
Timing differences are the most common and the least worrying: an invoice raised on 31 March that reaches their ledger on 3 April, or a payment they made on 30 March that cleared your bank on 1 April. Note them, agree the cut-off date, and they disappear on their own.
Example
| Amount | |
|---|---|
| Balance per your ledger | £12,480 |
| Invoice 2214 not yet received by customer | −£2,160 |
| Payment of 29 March in transit | −£1,800 |
| Customer deducted £540 for a short delivery; credit note not yet issued | −£540 |
| Balance per customer’s records | £7,980 |
The reconciliation shows that the customer does not dispute £2,160 or £1,800; those are timing. The only real issue is the £540 short delivery. Confirm it, issue a credit note if the claim is valid, and chase the rest.
Unallocated cash on the account
A frequent finding is a payment sitting unallocated on the customer’s account, while the invoices it was meant to pay still show as overdue. The customer sees nothing owing; your ledger shows the opposite. Allocate the payment against the correct invoices using the remittance, and if there is no remittance, ask. How to treat payments that only cover part of an invoice is explained in partial payments from customers.
Close it in writing
Once the differences are understood, send the customer a short summary: the agreed balance at the cut-off date, the items each side will action, and what you expect to be paid and when. Keep the reconciliation with the customer record. If part of the difference is a genuine dispute, flag those invoices and handle them through the invoice dispute process rather than leaving them in the normal chasing cycle.
Make it rarer
Most reconciliation work comes from the same few root causes: invoices sent without the customer’s PO number, payments with no reference, and receipts allocated to the oldest invoice by default. Fix the master data and invoicing habits, and the next reconciliation is far shorter; see customer master data cleanup.