Credit card reconciliation: your business’s complete guide
Corporate cards are indispensable when running a business — but so is keeping tabs on those business expenses. That's where credit card reconciliation comes in. Reconciling credit cards isn’t just about balancing numbers; it’s about unlocking insights into your spending and keeping your financials spotless.
Whether you're a small business owner or managing a finance team, our handy guide demystifies credit card reconciliation. We’ll ensure you're well-equipped to tackle this task with confidence and ease.
What is credit card reconciliation?
Credit card reconciliation is the process of matching the transactions listed on your business's credit card statements with the corresponding entries in your accounting records.
Reconciling credit card statements verifies that your documented expenses reflect the actual amounts charged to your business credit cards, providing a reliable foundation for financial reporting, budgeting, and analysis.
This task is key for accurate financial reporting and helps you catch any discrepancies before they become financial headaches.
Types of credit card reconciliation
There are two types of credit reconciliation that you should be aware of:
1. Credit card statements for company expenses
This involves scrutinizing and reconciling credit card statements of company credit cards used by employees. Every coffee run, flight booking, or office supply purchase made with these cards needs to be verified. It's about ensuring that each expense logged by your team is legitimate and properly recorded in your business accounts.
2. Credit card merchant services for customer payments
This type of reconciliation deals with money flowing in and involves matching transactions processed by your business when customers pay using their credit cards. It covers sales, returns, and any associated fees. It's a bit more complex than tracking expenses, but it's crucial for accurately understanding your business’s income.
In this blog, we’re going to zoom in on the first type — the credit card statements reflecting your business expenses.
Why is credit card reconciliation important?
The credit card reconciliation process is important because it's like a fact-checker for your business's money matters. Reconciliation uses credit card statements and receipts to double-check that what’s recorded in your general ledger is true and accurate so you can avoid mistakes and oversights.
This process is especially important when it's time for an audit. Auditors need to see proof that every payment made or received by your business actually happened. Without this proof, your business could face serious problems during an audit.
The TLDR? Credit card reconciliation helps with:
Error detection: Spots mistakes before they spiral.
Fraud prevention: Keeps an eye out for suspicious activities.
Financial accuracy: Ensures your financial statements are on point.
Budgeting and forecasting: Helps with making informed financial decisions.
In short, reconciling your credit cards acts as your financial safety net, confirming everything is always as it should be.
Credit card reconciliation challenges (and how to address them)
Navigating the world of credit card reconciliation isn’t always smooth sailing. Let’s take a look at some common challenges and how to conquer them.
1. Mismatched transactions
Sometimes, what’s recorded in your books doesn’t match what’s on the credit card statement. These discrepancies can be a headache to sort out — especially if you’re reconciling credit card statements manually.
Solution: Adopt software that includes automatic credit card import. This ensures that every expense is captured as it happens without any heavy lifting on your part, which significantly reduces the chances of mismatches. By connecting your credit cards to spend management software like Expensify, you cut down on your reconciliation time and paint a more accurate financial picture with minimal effort.
2. Lost receipts
It can be tricky to keep every paper receipt you collect on business trips (or even when picking up something small for the office), but missing receipts can leave gaps in your financial records. This makes it hard to verify transactions and leaves you in a sticky spot if you ever face an audit.
Solution: Encourage a culture of prompt receipt submission by ditching paper receipts altogether. Tools like Expensify allow employees to capture receipts on the go with SmartScan technology, reducing the chance of lost receipts and ensuring every transaction is documented — so you can say goodbye to filling out receipt books for good.
3. Diverse data points
When your financial data comes from different sources (think credit cards, bank accounts, and expense reports), things can get overwhelming, leading to errors or oversights and making the reconciliation process more complicated than it needs to be.
Solution: Use a centralized system to manage all financial data. Expense management software like Expensify acts as a central hub for all your money stuff, pulling in information from various sources and aligning it within your existing accounting systems — like this integration with QuickBooks. With the right tools, data can flow smoothly between your credit cards and accounting records, so everything moves faster and stays accurate.
Credit card reconciliation best practices
Before you head out into the world and begin reconciling credit cards on your own, let's highlight some best practices to make this process a breeze.
Practice regular reconciliation: Don’t let it pile up. Make it a regular part of your routine.
Use reconciliation software: As we mentioned above, adopt spend management software to help you keep everything organized and accurate.
Set clear policies: Enforce straightforward guidelines for credit card usage so nothing is lost or put off due to confusion or lack of information.
Use a company credit card: Opt for a dedicated company credit card for business expenses. This helps keep personal and business transactions separate, making reconciliation simpler and more straightforward. Plus, it can also help you save money. Check out our Expensify Card savings calculator to see how much you could be getting back.
Implement audit trails: Keep detailed records of all transactions. This isn't just about keeping your finances transparent; it's crucial for compliance and makes audits a lot less stressful.
Common questions about credit card reconciliation
Still have questions about credit card reconciliation? Don’t worry; we’ve got you covered. Check out our FAQs below.
When should you reconcile your credit card?
You should reconcile your credit card regularly — at minimum, as soon as your statement arrives. Think of it as a monthly financial health checkup. Regular reconciliation helps you catch discrepancies early, keep track of spending, and ensure your financial records are always up-to-date.
What is the difference between reconciling a bank account and a credit card account?
The main difference between reconciling a bank account and a credit card account lies in the nature of transactions.
Reconciling a bank account is about ensuring all your cash inflows and outflows are accurately recorded. This includes checks, deposits, and withdrawals.
On the other hand, reconciling a credit card account focuses on verifying that all credit transactions — purchases, refunds, and fees — are correctly reflected. While both processes aim for accuracy in financial records, they deal with different types of transactions and statements.
What is a credit card reconciliation report?
A credit card reconciliation report is a detailed document that compares and verifies transactions on your credit card statement against entries in your accounting records, highlighting any discrepancies and their resolutions.
This report typically includes the date of each transaction, the amount, the vendor, and any discrepancies found and resolved. It's not just a summary; it's proof that your financial house is in order, offering transparency and a clear trail for audits.
Reconciling is easier than ever with Expensify
While reconciling credit cards might not be the most thrilling task on your to-do list, it's an essential one for every business. Fortunately, with tools like Expensify, this necessary chore becomes significantly easier and more accurate.
Ready to make reconciliation a breeze? Sign up today to get started.
Reconcile in your sleep.
Get time back for the things that matter with Expensify.
Expensify values your privacy. We’ll never sell your personal information to others.
