Corporate credit card reconciliation for efficient bookkeeping

When you use a credit card for business expenses, the payment might happen instantaneously, but there is a lot that goes on in the backend. The credit card transaction process for a company expense looks something like this

1. A cardholder (In this case an employee) uses a corporate credit card to complete a purchase. 

2. The merchant creates a purchase request using the card, which is then processed by standard networks like VISA, MasterCard, Maestro, etc., and forwarded to your credit partner.

3. Based on the credit limit of the business expense card used, the transaction is either approved or declined. The merchant receives an approved transaction status if the transaction is approved. At this point, the authorization of the purchase is successful. 

4. At the end of each day, the merchant’s bank sends across batches of approved transactions to the payment processors.

5. The payment networks then pass on these details to the card associations, in this case, your credit provider. 

6. The issuing bank within your credit partner’s network charges your account and transfers the necessary amount to the merchant’s bank.

7. Now, the transaction is complete. 

8. At the end of each month or the agreed-upon interval, your credit provider will send you a credit card transaction statement to be paid. 

The traditional method of reconciliation involves your finance team carrying out a manual check of all credit card expenses on the card statement and making sure that they match with the company expenses in your ledger. This is done to ensure the legitimacy of all transactions, check whether each transaction did occur, and can be traced back to expenses made by your employees.

If all the payments in your business ledger match with the expenses on the credit card statement, then your account books for the month can be closed. In a situation where there is a discrepancy between the statement and the expenses in the company ledger, then your finance team must find out the source of the payment and which employee carried out the transaction to clarify and solve the issue. 

This entire process of matching business expenses with credit card transactions is a tedious and time-consuming activity for your finance team, even if there are no discrepancies. But thanks to the introduction of advanced fintech solutions, the accounting process is becoming more simplified each day. 

For this particular case of reconciliation, businesses now have access to receipt scanner apps as part of an expense management software in the market. This allows the employees to directly scan and upload receipts of the credit card expenses they’ve made which can later be matched to card statements.

This is possible thanks to a technology known as OCR(optical character recognition). Using your credit provider’s app the OCR tech automatically reads important data from the picture of the receipt that you’ve uploaded and the credit card statement from the respective integrated accounting software.

The software then matches the values from the uploaded expense receipts and the statements from your accounting software to verify whether the expenses match the transactions on the statement.

The fact that all of this matching, reconciliation, and credit card processing for small businesses took hours and days to complete, now gets done automatically within a few seconds is a big deal for finance teams. Being able to close the books in such an efficient manner also helps prove your business's financial health.