Key takeaways
What this article covers, in order:
- The statement that didn't agree
- Rob's account with the merchant, Sep 2026
- Why the statement says £1,520
- The usual reasons a supplier statement won't match
- Supplier credit notes, done properly
- A monthly routine for the suppliers that matter
When you pay a supplier, the bank payment should be matched to the bill (or bills) it settles, and any credit notes from that supplier should be applied first so you only pay the net amount. Once a month, do a supplier statement reconciliation: check your balance for each main supplier against their statement. Do those three things and your aged creditors report will be right, you won't pay anything twice, and supplier disputes get much shorter.
The statement that didn't agree
Rob is a kitchen fitter in Norwich who buys most of his materials from one builders' merchant. At the start of Oct 2026, the merchant's statement says he owes £1,520. His own books say £860. He's sure he's paid what he owes. They're sure he hasn't.
Neither of them is wrong, as it turns out. They're just looking at different snapshots. Let's walk through his Sep 2026 and see why.
Rob's account with the merchant, Sep 2026
| Date | Item | Amount | Running balance (Rob's books) |
|---|---|---|---|
| 3 Sep 2026 | Bill 7712, worktops and fittings | £2,400 | £2,400 |
| 10 Sep 2026 | Bill 7745, tiles and adhesive | £1,150 | £3,550 |
| 17 Sep 2026 | Credit note CN-208, returned worktop offcut against bill 7712 | −£300 | £3,250 |
| 24 Sep 2026 | Bill 7790, sink and taps | £860 | £4,110 |
| 30 Sep 2026 | Bank payment to merchant | −£3,250 | £860 |
Check it: £2,400 + £1,150 − £300 + £860 − £3,250 = £860.
How the £3,250 payment should be matched
The payment on 30 Sep 2026 pays off bills 7712 and 7745, after the credit note:
- Bill 7712: £2,400 less credit note CN-208 of £300 = £2,100
- Bill 7745: £1,150
- Total: £2,100 + £1,150 = £3,250
So in the books, the one bank line is matched to two bills, and the credit note is applied to bill 7712. Both bills show as paid. Bill 7790 for £860 is still open, due in Oct 2026. That's Rob's £860.
If Rob had matched the £3,250 against bill 7712 alone, the books would show 7712 "overpaid" by £850 and 7745 still owing £1,150. Same total, wrong story, and next month he'd pay 7745 again.
Why the statement says £1,520
The merchant's statement, dated 30 Sep 2026, lists one more bill: invoice 7802 for £660, dated 29 Sep 2026, for some extra trims Rob collected that afternoon. The invoice was emailed on 1 Oct 2026, so it wasn't in his books yet.
| Supplier statement reconciliation at 30 Sep 2026 | Amount |
|---|---|
| Balance per Rob's books | £860 |
| Add: invoice 7802 on statement, not yet in Rob's books | £660 |
| Balance per supplier statement | £1,520 |
£860 + £660 = £1,520. Difference explained. Rob enters bill 7802, and the two now agree.
The usual reasons a supplier statement won't match
Nine times out of ten it's one of these:
- Timing on bills. The supplier has issued an invoice you haven't received or entered yet (Rob's case).
- Timing on payments. You paid on the 30th, it reached them on the 1st, so their statement doesn't show it.
- Credit notes not applied. They've raised one and you haven't entered it, or you've entered one they never actually issued (check you have the document).
- A payment matched to the wrong bill. The total might be right, but individual bills look wrong, so their "overdue" list doesn't match yours.
- A duplicate. The same bill entered twice in your books, or a payment made twice.
- Disputed items. Something you've refused to pay because it was damaged or never arrived, and they haven't credited yet.
Work through the statement line by line against your supplier ledger. Tick off everything that agrees. What's left is your list.
Supplier credit notes, done properly
A credit note reduces what you owe a supplier. They happen for returns, pricing errors, damaged goods or a goodwill gesture. Three ways it can be settled:
Applied to an existing bill
The most common. You've got an open bill; the credit reduces it. Pay the net. That's what happened with CN-208 above.
Held against future bills
There's no open bill right now, so the credit sits on the supplier's account. When the next bill arrives, apply the credit and pay the difference. Keep an eye on these; small credits have a habit of being forgotten for a year.
Refunded to your bank
The supplier sends the money back. A deposit appears in your bank from a supplier, which looks odd at first. Match that deposit to the credit note so it closes, rather than posting it as income. It's not income; it's your own money coming home.
A monthly routine for the suppliers that matter
You don't need to do this for every supplier. Pick the ones you spend most with, or the ones that send statements.
- [ ] Reconcile the bank for the month first
- [ ] Make sure every payment to the supplier is matched to specific bills
- [ ] Check all credit notes from the supplier are entered and applied
- [ ] Compare your supplier balance to their statement
- [ ] List the differences and the reason for each
- [ ] Enter missing bills or credit notes; query anything you don't recognise
- [ ] File the statement with a note of what you found
Fifteen minutes for a main supplier. It's dull and it saves real money, because suppliers do make mistakes, and so do we.
Matching tips that save time
Pay by bill, not by round number. Paying "£3,000 on account" makes matching a guessing game. Pay the exact total of specific bills where you can.
Use the supplier's invoice number as the payment reference. Most suppliers will thank you, and you'll be able to match payments months later without hunting.
Enter credit notes as soon as you get them. A credit note in a drawer is a payment you'll make for the full amount.
Don't net off silently. If you deduct something from a payment because of a dispute, tell the supplier in writing what and why. Otherwise their statement and yours will disagree forever.
How HelloBooks helps
You can record supplier bills and keep an aged creditors (AP ageing) report on the Free plan. When your payments come through your Open Banking bank feed or a CSV statement, they land in a review list, and on the reconcile screen each line gets an AI match suggestion with a confidence score and a reason, so you can confirm which bills a payment settles. If a match is wrong, you can unmatch in one click.
At month end, the reconciliation report shows opening balance, cleared items, outstanding items and closing balance, and exports as PDF or CSV, which is handy alongside a supplier statement. On Pro, bills & approvals add a sign-off step before payment. HelloBooks doesn't make the payments itself; you pay from your bank as normal. Builders and trades may find the construction page useful, and there's more on bank reconciliation software.
FAQs
How do I record a supplier credit note?
Enter it against the supplier, linked to the original bill if it relates to one. Then either apply it to an open bill, hold it against future bills, or match it to a refund if the supplier pays you back.
What if one payment covers several supplier bills?
Match the single bank line across each bill it covers, with any credit notes applied first. The amounts should add up exactly to the payment. If they don't, check for a part payment or a missing credit.
Why doesn't my supplier balance match their statement?
Usually timing: a bill or payment that one side has recorded and the other hasn't yet. Other common causes are unentered credit notes, payments matched to the wrong bill and duplicates. Work through the statement line by line.
How often should I reconcile supplier statements?
Monthly for your main suppliers is a good habit, and always at year end. Your accountant will often ask for supplier statements as part of the year-end handover.
A supplier refunded money to my bank. Is that income?
No. It's settling a credit note, so match the deposit to the credit note on that supplier's account. Posting it to income would overstate your sales.
Get the matching right and supplier statements stop being scary letters.
Start free, no card needed. Try HelloBooks Free
