Corporate credit card reconciliation for efficient bookkeeping
Maintaining financially sound accounts is a significant part of any business. For your finance team, this process includes the tedious task of reconciling company expenses with credit card transactions. Knowing where your money comes and goes from is essential to business growth.
Credit card reconciliation is the process by which finance and accounting teams confirm that the transactions that are showing in a business's credit card statement are accurate and matching with entries made in the company’s general ledger.
For efficient and accurate financial reporting, you must confirm that these transactions did actually take place. You must also ensure that the expenses that have been entered on both credit card statement as well as general ledger are correct and valid.
The process of reconciliation usually takes place at the end of every month, while towards the end of each quarter or financial year a more significant financial closing happens.
Company credit card reconciliation can either be done manually or with the help of automation. When it is done manually, the finance team or the accountants physically verify each and every transaction showing in the card statement.
They do this by matching the transaction made against the entries made in the general ledger books of the company. On the other hand, if you choose to do it with an automated expense management system this entire process happens automatically where the software synchronizes itself with the accounting systems to reconcile the accounts.s.
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 process starts with collecting and sorting proof of expenses, i.e. receipts or invoices. Receipts come in a number of different forms and they are important to ensure accountability for money spent. You must collect and store purchase receipts and invoices for future reference as well.
Once you have collected and sorted all the receipts and invoices the next step is to use them to match expenses made against transactions recorded. This is done by matching credit card statements to business expenses reported with the receipts.
Either with or without intention, there is always a probability of errors being made. Your finance teams must be alert to detecting these errors and mistakes. When errors are identified your teams must not waste time and notify the banks immediately.
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.
Every expense that takes place using a corporate credit card immediately gives your employee the ability to add necessary details and attach the receipt to prove the authenticity of the transaction. This streamlines the process of conducting and managing expenses.
Automatic reconciliation is probably the most useful for the finance team as it saves them countless hours of trying to match company expenses with credit card transactions. No more do they have to face the nightmare of a discrepancy between your ledger & card statements and end up running around trying to figure out who is responsible for the transaction.
A major benefit of maintaining sound bookkeeping is all the rewards and cash back that you receive from your corporate credit provider.
Matching all your expenses with credit card statements leads to complete transparency and better utilization of funds going forward.
Automatic reconciliation of expenses helps to reduce the amount of fraud that might occur while using company credit cards.
Automating your expense management with Volopay becomes extremely easy once you integrate your accounting software with our platform. Each credit card transaction that your employees conduct using Volopay cards is recorded in real-time on the Volopay dashboard with the ability to instantly add the necessary details and attach the relevant expense receipt.
This makes it super simple for your finance team to match company expenses with credit card statements and sync directly to your accounting software. What might have taken days at the end of each month, quarter, and financial year will now take only hours to complete.