# How to do a vendor reconciliation with AI, step by step

> A vendor reconciliation compares the vendor's statement of account with the vendor's ledger in your books, line by line, and explains every difference. Start from the same date on both, tick off the invoices, payments and notes that appear on both sides, and list what is left: invoices you have not booked, payments still in transit, TDS, credit notes and debit notes one side has not recorded, and duplicates.

Source: https://www.zerogrunt.ai/guides/vendor-reconciliation · By ZeroGrunt team, ZeroGrunt · Updated 2026-11-02

## What you need

- The vendor's statement of account for the period, from the vendor.
- The vendor's ledger from your books for the same period.
- The opening balance on both, on the same date.

## Step by step

1. **Agree the opening balance.** If the two openings differ, clear that first, or carry it as a known difference.
2. **Tick off what matches.** Each invoice, payment, credit note and debit note that appears on both sides with the same amount.
3. **List what is left on the vendor's side.** Usually invoices you have not booked, or credit notes you have not received.
4. **List what is left on your side.** Usually payments the vendor has not applied yet, debit notes the vendor has not accepted, and TDS.
5. **Explain each item** and decide who acts: book the missing invoice, chase the credit note, send the payment advice.
6. **Check the closing balances agree** once the explained items are added back.

## The usual differences

| Difference | Shows on | What to do |
|---|---|---|
| Invoice not booked | Vendor's side | Find the invoice, book it, or ask for a copy |
| Payment in transit | Your side | Send the payment advice with the invoice numbers |
| TDS deducted | Your side, lower by the TDS | Share the TDS certificate; it clears once the vendor sees the credit |
| Credit note not booked | Vendor's side, lower | Ask for the credit note and book it |
| Debit note not accepted | Your side, lower | Follow up for the matching credit note |
| Same invoice booked twice | Your side, higher | Reverse the duplicate before it is paid |

## A worked example

The vendor says you owe ₹12,40,000. Your books say ₹9,85,000. The gap is ₹2,55,000.

| Item | Amount |
|---|---|
| Three invoices on the vendor's statement, not in your books | ₹3,10,000 |
| One credit note the vendor issued, not booked by you | −₹55,000 |
| **Explained gap** | **₹2,55,000** |

Book the three invoices and the credit note, and both ledgers tally to the rupee.

## How to do it with AI

1. Every invoice and credit note is booked the day it lands, so no gap builds up.
2. When the vendor's statement arrives, the AI lines it up against your ledger.
3. It lists each difference, and who has to act on it.
4. You approve from email. It books your side and sends the vendor theirs.

This is how Agent Zero works.

## Questions people ask next

### What is a vendor reconciliation?

A vendor reconciliation compares the vendor's statement of account with the vendor's ledger in your books, line by line, and explains every difference. Start from the same date on both, tick off the invoices, payments and notes that appear on both sides, and list what is left: invoices you have not booked, payments still in transit, TDS, credit notes and debit notes one side has not recorded, and duplicates.

### How often should we reconcile vendor accounts?

Monthly for your large and frequent vendors, and at least quarterly for the rest. A difference found in the month it happened takes minutes to clear; one found at year end can take weeks.

### Why does the vendor's balance differ by the TDS amount?

You pay the vendor net of TDS and deposit the TDS with the government. The vendor reduces its receivable by that TDS only once it sees the credit in its tax statement, so for a while its balance is higher than yours by the TDS.

### Who should send the statement, us or the vendor?

Ask the vendor for its statement of account for the period. Comparing its view with yours is the point.