Best practices when it comes to confirmation letters

When in essence the confirmation letter procedure isn’t seemingly that difficult – you write a balance and ask if the other party agrees with it – there are however a few things we suggest to keep in mind when it comes to confirming accounts payable and receivable balances.

First off as for the letter itself, you make sure you have the right address, right balance and all the other information like contact where to send all questions and replies etc; however, there is one thing you may want to avoid when preparing those letters. Avoid the clause ‘In case of no reply from you, we deem our balance correct’ like sentence on the confirmation letter. The reason behind this is fairly obvious; the counterparty may simply have not received the letter due to various reasons or needs a bit more time or convincing to actually reply to your request. With this sentence you have no way of knowing whether they actually agree with the balance or not.

Another thing we suggest is to have more regular confirmation procedures with major suppliers and customers instead of confirming all balances annually. Keeping all things sorted with major counterparties makes the process running smoother.

When making the selection (in case you decide not to confirm all balances) to make sure you are not only taking those parties with significant balances, but also those with higher turnover over the period (like a year when performing an annual confirmation procedure). It may very well be the case where the balance of a major supplier is close to zero, however, there are various invoices missing for an example.
If you keep those few best practices in mind you’re confirmation procedure should be a bit more effective than it would normally be.