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What is credit card reconciliation for a business?
Simply put, corporate credit card reconciliation means checking and confirming that the transactions on the company credit card statements match up with the transactions in the company's ledger accounts. Most of the time, this is done to make sure that the transactions are real and correct.
Any problems that come up during the process must be dealt with and fixed as soon as possible. This is a very important part of closing out the books for a business. Every business has its own schedule, which could be every two weeks, every month, or something else.
Different ways to settle up with a credit card
There are two different kinds of credit card balance checks:
Reconciliations based on statements
When you use a business credit card to buy something, you usually get a statement. This means that you have to match the charges made on your organization's credit card with the ones on the statement. The number of reconciliations needed will depend on how many corporate credit cards are in use at any given time.
Reconciliations of merchant service
When your customers pay you through a merchant account provider, this is called a merchant service reconciliation. This is how your business makes money, and since the merchant provider is just a middleman, it's important to get these transactions straightened out as soon as possible.
Why is it important for a business to reconcile its credit cards?
You can compare your expenses on your credit card statement. Many businesses and people pay their bills without giving them a second thought. This could be a big mistake because it could lead to bigger problems in the future.
This is why reconciling is important for your business.
Reconciliations let you pay for all business expenses with a credit card and a check.
When you do reconciliations often, you can be sure that the money you pay for expenses matches what is written in your books.
A business can't run without an audit. This makes sure that your business is always ready for an audit.
The process of matching up business credit card bills
When you reconcile your cards, you match the transactions on your cards to the same record in your books. This makes sure that the transactions are finished, correct, and allowed. Reconciliation is also an important part of the closing process (accounting books). So, the main goals of these kinds of talks are
Your company's internal records match the statement of company card expenses.
The bills are free of mistakes and don't have any extra charges or random entries.
Problems with reconciling business credit cards
1. Can more than one employee use the same business card?
It's not unusual for more than one person from the same company to use the same business card. This isn't wrong, but it does cause problems.
Imagine having to add up all the charges on a card that several employees use. In addition to collecting receipts, bills, and other proof of expenses, you must be able to identify the right employee who is responsible.
2. Dates on credit card statements that don't match
Companies' month-end processing dates rarely match up with the dates on their corporate card statements. It might not be impossible to find a way to compare the deals. But if you want to compare them over time or make reports based on the data you collect, you may have to put in a little more work.
3. Comparisons made on paper
Employees can show proof of costs by handwriting receipts, bills, or other documents. Even if it's a policy, you should think about automating it. Paper documents are hard to work with because they need to be kept in good shape, may need to be clarified (if they aren't legible), and may not be correct. Also, compared to digital versions, sharing these documents is hard and takes a lot of time.
4. Too many sources of data
There are many different ways to use a business credit card. So, these costs can be backed up by more than one document (proof of expenses). For example, a corporate credit card can be used to pay vendors and suppliers. But purchase orders, invoices, and payment receipts are proof of these kinds of costs. Imagine having to sort and sift through so many pieces of paper to figure out how the card payments add up.
Simply put, corporate credit card reconciliation means checking and confirming that the transactions on the company credit card statements match up with the transactions in the company's ledger accounts. Most of the time, this is done to make sure that the transactions are real and correct.
Any problems that come up during the process must be dealt with and fixed as soon as possible. This is a very important part of closing out the books for a business. Every business has its own schedule, which could be every two weeks, every month, or something else.
Different ways to settle up with a credit card
There are two different kinds of credit card balance checks:
Reconciliations based on statements
When you use a business credit card to buy something, you usually get a statement. This means that you have to match the charges made on your organization's credit card with the ones on the statement. The number of reconciliations needed will depend on how many corporate credit cards are in use at any given time.
Reconciliations of merchant service
When your customers pay you through a merchant account provider, this is called a merchant service reconciliation. This is how your business makes money, and since the merchant provider is just a middleman, it's important to get these transactions straightened out as soon as possible.
Why is it important for a business to reconcile its credit cards?
You can compare your expenses on your credit card statement. Many businesses and people pay their bills without giving them a second thought. This could be a big mistake because it could lead to bigger problems in the future.
This is why reconciling is important for your business.
Reconciliations let you pay for all business expenses with a credit card and a check.
When you do reconciliations often, you can be sure that the money you pay for expenses matches what is written in your books.
A business can't run without an audit. This makes sure that your business is always ready for an audit.
The process of matching up business credit card bills
When you reconcile your cards, you match the transactions on your cards to the same record in your books. This makes sure that the transactions are finished, correct, and allowed. Reconciliation is also an important part of the closing process (accounting books). So, the main goals of these kinds of talks are
Your company's internal records match the statement of company card expenses.
The bills are free of mistakes and don't have any extra charges or random entries.
Problems with reconciling business credit cards
1. Can more than one employee use the same business card?
It's not unusual for more than one person from the same company to use the same business card. This isn't wrong, but it does cause problems.
Imagine having to add up all the charges on a card that several employees use. In addition to collecting receipts, bills, and other proof of expenses, you must be able to identify the right employee who is responsible.
2. Dates on credit card statements that don't match
Companies' month-end processing dates rarely match up with the dates on their corporate card statements. It might not be impossible to find a way to compare the deals. But if you want to compare them over time or make reports based on the data you collect, you may have to put in a little more work.
3. Comparisons made on paper
Employees can show proof of costs by handwriting receipts, bills, or other documents. Even if it's a policy, you should think about automating it. Paper documents are hard to work with because they need to be kept in good shape, may need to be clarified (if they aren't legible), and may not be correct. Also, compared to digital versions, sharing these documents is hard and takes a lot of time.
4. Too many sources of data
There are many different ways to use a business credit card. So, these costs can be backed up by more than one document (proof of expenses). For example, a corporate credit card can be used to pay vendors and suppliers. But purchase orders, invoices, and payment receipts are proof of these kinds of costs. Imagine having to sort and sift through so many pieces of paper to figure out how the card payments add up.
