It’s said money makes the world go round and you’d be hard-pressed to find anyone who says otherwise. In most companies, payments made to vendors make up for the largest cash outflow. To say, reconciliation of said vendor statements is of utmost importance, would be an understatement.
Even though vendor reconciliation should be the priority for any organization, this task is often overlooked due to it being a laborious and time-consuming activity. Therefore, an organization should employ an effective process for vendor reconciliation.
What are vendor statements and reconciliation reports?
In layman terms, a vendor statement refers to a document given by a seller to a buyer before they formally enter into a contract of sale. It lists all unpaid invoices on a certain date. A vendor statement can also comprise any uncleared items like credit notes, credit payments, etc.
A reconciliation report comprises matching invoices with the documents in your own accounting system. Unmatched documents if any, are discrepancies and form a part of the reconciliation report as well.
Benefits of Vendor Reconciliation
There are several ways in which vendor reconciliation is advantageous for a business. These are:
- 1.Timely processing of invoices
- 2. Identifying duplication of invoices
- 3. Keeping tabs on cash inflows and outflows
- 4. Implementing audit control
What is GSTR-2A Reconciliation?
GSTR-2A is a statement of purchases made by recipient, which is generated by the system. It is a read-only statement and there is no need to file it. GSTR- 2A Reconciliation basically implies matching data uploaded by supplier with purchase data of recipient. Through reconciliation, one ensures that all the transactions have been recorded properly and if there are any errors in reporting of the transaction, the same can be amended accordingly by the respective suppliers.
Importance of Reconciliation
Reconciliation is a necessary activity that needs to be undertaken by a business or a company. Its importance cannot be overstated. Let’s look at the different ways in which reconciliation helps in running an organization:
- 1. Avoid duplicity of data.
- 2. Rectify the errors and maximize availment of credit.
- 3. Verify that correct amount of credit has been availed in GSTR-3B.
- 4. Changes in Input Tax Credit (ITC) Rules mandate that provisional ITC can only be availed to the extent of 10% of eligible credit available in GSTR-2A making reconciliation a necessary activity.
- 5. Identify fake invoices.
However, reconciliation is not an easy exercise to undertake and some challenges may crop up during the said activity. Let’s look at some of the challenges in carrying out reconciliation.
Challenges in Reconciliation
- 1. Difficult to reconcile a massive amount of data.
- 2. In the case of a recipient operating in multiple locations, the seller may raise invoices with different GSTIN instead of actual recipient GSTIN.
- 3. In form GSTR-2A, invoices/records up to 500 entries for a section can be seen online and if records number more than 500, a file will be created which can be opened in offline utility tool available on the GST portal.
- 4. Entries will not match in case the supplier has uploaded the data but the recipient forgot to take credit or vice-versa.
- 5. Differences due to rounding off issues.
- 6. Recording invoices in different tax periods by the supplier and the recipient.
Now, where does Webtel step into the picture? Our customized solution offers you innumerable benefits while undertaking GSTR- 2A Reconciliation, some of which are listed below.
- 1. GSTR-2A GSTN Data and Recipient's purchase both shown on a single window for better comparison.
- 2. Easy reconciliation even in case of massive amount of data.
- 3. Filters to identity data that exists in accounts but not in GSTN or vice-versa.
- 4. Party wise summary Report for easy reconciliation.
- 5. PAN-based Reconciliation for assessees having businesses in multiple locations.
- 6. Rounding off issues can be handled.
- 7. Invoices/Notes pertaining to a particular financial year such as for example, FY 2017-18 but incorrectly uploaded in the subsequent financial year by supplier i.e. 2018-19 are also shown in reconciliation of previous FY 2017-18 for easy reconciliation.
- 8. Month-wise and annual reconciliation are both available.
- 9. Email to vendors in case of mismatched data or if data does not exist in GSTR-2A can be sent.
Vendor reconciliation is critical for running a tight ship and ensuring that you maintain a healthy balance of cash inflows and outflows in your organization. It helps identify and correct any discrepancies that may occur between your system and your vendor’s accounts. Through vendor reconciliation, you can lower vendor queries, enhance your vendor relationship and keep firm control over vendor spend.
To make your life easier, go for WEB GST. It’s an inspired GST software that will not only take care of your vendor reconciliation needs but also provide data security, help in preparation and filing of GSTR 1, 3B, 9, & 9C & automatically identify instances of data mismatches for GST compliance.
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For any questions or queries regarding GSTR-2A Reconciliation or Webtel's GST software, please write to firstname.lastname@example.org or simply comment to this article.