Streamline Your Credit Card Reconciliation Process with Automation

Chances are you’ve noticed an incorrect charge on your credit card before, be it a personal or business credit card. For businesses, performing the credit card reconciliation process is highly crucial to ensure that the business’ financial statements are accurate.

Given that businesses rely on these statements to make important decisions, you can understand why it’s necessary to keep them up-to-date and properly managed. Let’s review what the credit card reconciliation process entails, as well as how automation software can make it easier to handle.

Coming Up

1. What is the Credit Card Reconciliation Process?

2. Why is Credit Card Reconciliation Important?

3. How to Reconcile Credit Card Expenses?

4. What are the Types of Credit Card Reconciliation?

5. Why is Reconciling Credit Cards Challenging?

6. How to Make Credit Card Reconciliation Easier?

7. How Automation Tools Help Credit Card Reconciliation?

8. Credit Card Reconciliation Best Practices

9. Future Trends in Credit Card Reconciliation

10. Final Thoughts

What is the Credit Card Reconciliation Process?

The credit card reconciliation process is a system by which accountants check credit card statements versus the general ledger. Since every company transaction exists within the general ledger, you’ll need to make sure that whatever is displayed on a credit card statement is in line with what’s reflected on the general ledger, and vice versa.

If the statement and general ledger match, then you can close the books. If there are discrepancies, then you have to resolve them by finding out who made the payment and why there is a mismatch of data.

While it is technically possible to perform manual credit card reconciliations, it is less than optimal in practice. The sheer amount of transactions and time it takes to locate data and compare it could be better spent on high-level, strategic, and analytical tasks. Hence, the help of automation tools (which we will touch on again shortly).

Why is Credit Card Reconciliation Important?

Accountants rely on the general ledger as a foundation to deduce the company’s overall financial health. Along with balance sheets and income statements, the general ledger needs to maintain accurate records.

General ledgers can be affected by fraud or incorrect information, which could make the company’s books look better or worse off than reality. So, having reconciliation is a checks and balances system that helps to make sure everything is right.

Additionally, a company will need the general ledger to be properly stated especially in the event of an audit. A third party or tax regulation agency may perform an audit on your general ledger. Performing account reconciliations and credit card reconciliations is part of the requirements to protect the ledger’s integrity.

In the event that multiple hands within your business have access to the company’s credit cards, then you can use the credit card reconciliation process for internal oversight to see where expenses are being made.

Failing to perform regular credit card reconciliations can lead to a host of risks, including undetected fraudulent charges, inaccurate financial reporting, and potential legal and compliance issues.

How to Reconcile Credit Card Expenses?

From a bird’s eye view, the credit card reconciliation process consists of matching general ledger records to the credit card statements. But, let’s dive deeper into the process (by doing so, you can also begin to see why automation is so useful here).

1. Collect and Organize Receipts

Your receipts serve as proof of expenses. Receipts should be collected, organized, and stored. Some companies will use receipt scanners, expense reports, and Excel sheets to store receipts digitally.

2. Match Expenses

Now comes the fun part- you’ll need to check through every expense on the credit card statement in comparison with the general ledger. Clearly, depending on the number of transactions you have, this can become a very time-consuming endeavor. Or, you can utilize an automation tool like SolveXia that can automatically perform transaction matching.

3. Rectify Errors

Should there be mismatched data, you’ll have to figure out why. If there’s an error on the bank’s side, reach out to notify them. Some common errors can include a charge for a failed transaction, duplicate charges, or a missing refund for a canceled purchase.

With the use of automation software, the tool will notify you immediately so you can rectify these issues in a timely manner rather than having any further delay or issues arise.

What are the Types of Credit Card Reconciliation?

There are two main types of credit card reconciliation:

1. Credit Card Statements

Any purchases that are made by employees with access to the credit card or business leaders will be displayed on a statement from the company who issues the credit card.

However, credit card statements don’t always match up with the time at which you perform your month-end close process. You’ll have to take the timing differences into consideration.

2. Credit Card Merchant Services

If it’s the case that you process payments from customers via credit card, then your merchant account service provider will supply you with documentation. This serves as a middleman between the customer, the transaction processing portal, and your company’s bank account.

Why is Reconciling Credit Cards Challenging?

Although the idea of matching transactions between two documents seems like a no brainer, it can become quite complex when it comes to the credit card reconciliation process. A few reasons why it can get challenging are:

1. Shared Cards

In many corporate settings, multiple people have access to the company card. This can make it more complicated to track down receipts and the responsible party for transactions that may show up incorrectly.

To overcome this, every person can get their own company card. It’s a great solution, but it will add more credit card reconciliations into the mix (which isn’t an issue if you’re leveraging automation solutions that handle data collection and transaction matching for you).

2. Statement Dates

The timing discrepancies between credit card statement dates and your company’s month-end close process can create significant challenges. Credit card statements are typically issued on a monthly basis, but their cycle often does not align perfectly with your fiscal month-end. For example, if your company’s fiscal period ends on the 30th, but your credit card statement is issued on the 25th, there will be transactions between the 25th and the 30th that aren’t included in the current statement. This misalignment can lead to incomplete financial records, delays in reconciliation, and increased manual adjustments.

3. Paper Receipts

How often do you write letters by hand instead of sending an email? Chances are, very rarely. In the same vein, the days of holding onto paper receipts have been long gone. Incorporate a system that digitizes paper receipts and ensures that your team members with access to the company card are submitting accurate expense reports (with digital copies of the receipts for easy referencing).

4. Diverse Data Sources

When it comes to paying suppliers, many companies receive an invoice from the supplier, along with the credit card statement, and a receipt from the supplier for proof of payment. Those are three different documents that support the same purpose, namely proof of expense.

If you have to manually pull those three documents to go through a single line item, imagine how long that takes for hundreds or thousands of line items. Automation software will centralize all your data in a single repository and perform transaction matching.

How to Make Credit Card Reconciliation Easier?

Because of these common challenges of the credit card reconciliation process, automation solutions like SolveXia have been developed to help finance teams across organizations. Let’s take a look at some ways by which you can make your credit card reconciliation process a lot easier, efficient, and effective. Make the credit card reconciliation process easier by:

1. Automating Data Entry

Rather than having your finance team and employees manually input and verify expenses, you can use software to handle data entry and matching. Not only is this a time-saving solution, but it also reduces the risk of manual error. Your team can spend hours, days, or weeks matching transactions and still run the risk of missing fraudulent or duplicate charges.

2. Digitizing Receipts

Paper receipts can easily get lost in the shuffle. And, a receipt is often the necessary missing piece of the puzzle to verify whether or not a transaction actually took place.

As soon as any person completes a transaction with a credit card and receives a receipt, they should use a mobile app to snap a photo and upload it into a system that the company has access to. When performing account reconciliation via a solution like SolveXia, you can connect your systems through APIs so data is pulled.

3. Streamlining the Process

With software, you can design and repeat an efficient credit card reconciliation process. Having a well-documented and well-thought out credit card reconciliation process that is automatically executed will help every responsible party understand their roles and uphold accountability.

Since there are various phases involved, each team will know what falls under their list of responsibilities.

How Automation Tools Help Credit Card Reconciliation?

As you can see from the solutions above, automation solutions play a major role in reducing the hassle that can come along with the credit card reconciliation process.

Software automation platforms can import data from various systems, perform transaction matching, analyze expense details, and identify mismatching records.

With the use of an automation tool like SolveXia which can manage your company’s account reconciliation processes, your finance team benefits from time savings, error reduction, and streamlined workflows.

Your executive team benefits from internal control, cost savings, access to timely financial statements, and reduced compliance risk.

Credit Card Reconciliation Best Practices

While credit card reconciliation can be a challenging and time-consuming process, following best practices can help streamline the workflow and ensure accuracy. Here are some key tips to optimize your reconciliation process:

1. Establish clear policies and procedures: Define and document the entire reconciliation process, including roles and responsibilities, deadlines, and approval workflows. Ensure all team members understand and adhere to these guidelines.

2. Reconcile frequently: Don't wait until month-end to start reconciling. Perform reconciliations on a regular basis, such as weekly or even daily for high-volume transactions. This helps identify and resolve discrepancies promptly, preventing them from snowballing into larger issues.

3. Automate data collection and matching: Implement software solutions that automatically import credit card statements, receipts, and other supporting documents into a centralized repository. Use intelligent transaction matching algorithms to streamline the reconciliation process and reduce manual effort.

4. Enforce receipt submission and expense reporting: Require all credit card holders to promptly submit receipts and complete accurate expense reports. Set clear deadlines and send reminders to ensure compliance. Consider using mobile apps or online tools to make this process easier for employees.

5. Standardize transaction descriptions: Establish a consistent format for entering transaction details, such as vendor name, date, and expense category. This makes it easier to match transactions across different documents and identify any discrepancies.

6. Regularly review and update master data: Maintain accurate and up-to-date information on vendors, expense categories, and GL accounts in your financial systems. This reduces the likelihood of manual coding errors and ensures a smooth data flow throughout the reconciliation process.

7. Leverage exception reporting: Use automated tools to flag unusual transactions, such as duplicate charges, round dollar amounts, or expenses that exceed predefined thresholds. Focus your efforts on investigating and resolving these exceptions rather than manually reviewing every line item.

8. Provide training and support: Ensure all employees involved in the credit card reconciliation process receive adequate training on policies, procedures, and any software tools used. Offer ongoing support and resources to help them navigate challenges and stay up to date with best practices.

By implementing these best practices, companies can significantly improve the efficiency and accuracy of their credit card reconciliation process, saving time and reducing the risk of financial misstatements.

Future Trends in Credit Card Reconciliation

To stay ahead in credit card reconciliation, businesses should be aware of these key trends:

1. Increased Automation and AI: Advanced algorithms and AI will enable more accurate transaction matching, reduce manual effort, and detect anomalies in real-time.

2. Integration with Expense Management Systems: Seamless integration will allow for a more streamlined workflow, with transactions automatically flowing into expense reports.

3. Real-time Data Synchronization: Cloud computing and API integrations will enable instant updates between credit card statements, financial systems, and reconciliation tools.

4. Mobile Accessibility: Mobile-friendly interfaces and apps will allow employees to submit receipts, approve transactions, and monitor reconciliation status on the go.

5. Continuous Auditing and Monitoring: Automated tools will continuously review transactions and reconciliations, flagging discrepancies or non-compliant activities.

6. Predictive Analytics: By analyzing historical data and patterns, businesses can forecast potential discrepancies, detect anomalies, and optimize their reconciliation process.

To stay ahead, businesses should invest in modern reconciliation tools, regularly update processes, provide staff training, and stay informed about industry best practices. By adopting a proactive approach, businesses can streamline financial operations, reduce risk, and gain a competitive edge in a digital and data-driven world.

Final Thoughts

The credit card reconciliation process is a necessary aspect of conducting business. With the advancement in technology, it no longer has to be a time-consuming and dreaded process for your finance team who once had to track down data, organize paper receipts, and manually check every line item for accuracy.

To see how SolveXia can help your company perform its account reconciliations, request a demo!‍