What Is Credit Card Reconciliation?

The last thing a business owner wants is money going out that can’t be accounted for. Credit card reconciliation clarifies how every cent is used and ensures spending stays on track. Additionally, reconciling expenses helps you catch unauthorised or problematic transactions, reducing the risk of getting caught out by fraud.

So, if you just started a small business or haven’t been keeping up with your company’s credit card transactions, now is the time to start.

What is credit card reconciliation?

Credit card reconciliation is an accounting process that ensures accurate financial reporting for companies that use corporate credit cards. The process verifies that the company’s credit card statement transactions match internal business records.

The process of reconciling credit card expenses typically involves a company’s finance department or an accountant, who must meticulously record all transactions in a spreadsheet and cross-check them against internal records. Businesses that accept customer credit card payments online or at a point of sale must also take their credit card merchant services into account.

The process is complete if you don’t find any loose ends when reviewing the records. However, if you find discrepancies — such as duplicate charges, signs of credit card scams, or purchases without a matching receipt — you must resolve these issues with the bank before finalising reconciliation.

Businesses should keep corporate credit card receipts and other records for tax purposes at least until the end of the financial year. It’s also important to keep accounting up to date and resolve any issues in case of an audit.

Credit card reconciliation process

Credit card reconciliation is not a step a business wants to skip because it’s a way to ensure any expenses incurred on a corporate card can be accounted for and cross-checked against internal records and the company’s credit card statement.

How to reconcile credit card expenses

There are three main steps to credit card reconciliation:

Sort receipts

Employees using a corporate credit card to cover work-related expenses must provide a receipt as proof of purchase. These receipts need to be logged in a financial spreadsheet.

Remember that the more corporate credit cards circulated to employees, the more receipts will need processing.

Track expenses

Once the receipts have been logged, expense amounts are checked and matched to the corresponding purchase order or department expenses. At this point, any missing receipts will need to be chased up with the employees responsible.

Identify and resolve errors

Unauthorised transactions, missing refunds or chargebacks, or what appear to be fraudulent charges will become apparent once all expenses have been matched with a receipt and ironed out with the bank or credit card company that issued the cards.

» MORE: What to know about credit card fraud detection

How to improve credit card reconciliation

It may have challenges, but credit card reconciliation is necessary. A large company will have dedicated staff to carry out the process, but overall, it’s tedious. There are ways to lighten the load, though.

Allocate one card per employee instead of having a shared card. Doing so makes it easier to chase receipts because you’ll know who is responsible for a particular expense. Still, a larger company that has many executives and employees with allocated corporate cards will still deal with a mountain of receipts.
Ask employees to take photos of any receipts on their mobile phones. This way, you’re not dealing with damaged receipts that have been sitting in a wallet or the bottom of a bag for weeks. Digital receipts are becoming increasingly common to reduce paper waste, and they have the added benefit of making it easier for employees to keep track of receipts. This is especially easy with virtual versions of corporate cards.
Invest in the right tools. Expense tracking and accounting software can reduce the challenges associated with reconciliation, such as management software automating the entire process. The right tools can be a game-changer for small businesses without a finance department that needs to streamline the process.

» MORE: When are business credit cards worth it?