Regardless of the size of your business, you need to keep on top of your corporate card spend.
If you’re interested in learning how to do a credit card reconciliation, you’ve come to the right place.
What is credit card reconciliation?
Credit card reconciliation is the process of comparing your credit card statements to your internal records to make sure that all transactions are accurate and accounted for. It’s a crucial step in maintaining financial control and preventing expense fraud.
What are the two types of credit card reconciliation?
Credit card statement reconciliation for company expenses
This type deals with expenses incurred by your company using its credit cards. The aim is to make sure that all recorded expenses in your financial books match the charges on the credit card statements.
The benefits
- Makes sure your financial statements reflect true business activity.
- Helps in budgeting and planning financial activities.
- Detects unusual or fraudulent transactions.
For example
Imagine you run a mid-sized tech company. At the end of every month, your finance team receives credit card statements from your bank. They compare these statements with your internal expense records to make sure everything matches up. One month, they notice a charge for a luxury hotel stay in London that wasn’t logged in your records. Upon investigation, they find it was a fraudulent charge and promptly report it to the credit card issuer for resolution. This proactive reconciliation saved your company from an unauthorised expense.
Credit card merchant service reconciliation for customer payments
Credit card merchant service reconciliation involves managing the income side of a business’s financial activities. This process makes sure that all customer payments made via credit cards are accurately reflected in the company’s financial system.
The benefits
- Makes sure all sales and income are correctly recorded in financial statements.
- Provides accurate information on the company’s financial performance to stakeholders.
- Helps manage cash positions effectively and plan for future expenditures.
For example
Suppose you own an online retail store that accepts credit card payments. Throughout the month, customers purchase products using their credit cards. At the end of the month, you receive a report from your payment processor showing all the transactions.
You reconcile this report with your sales records to make sure every payment received matches a sale recorded in your system. You notice that a large payment from a customer doesn’t appear in your sales records. After investigating, you discover a technical glitch in your sales software that failed to record the transaction. By identifying this issue during reconciliation, you can correct your records and make sure your financial statements are accurate.
How to do a credit card reconciliation
Here’s an easy to follow 8-step guide on how to do a credit card reconciliation:
1. Gather all your credit card statements and receipts
- Credit card statements: collect the latest credit card statements from the issuer.
- Internal records: prepare your receipts, invoices, expense reports, and internal ledger (if available).
- Bank account statements: for payments made, have the corresponding bank statements on hand.
2. Check the opening balance
Compare the opening balance on the credit card statement with your internal records. Make sure that the previous balance matches your records and any payments made.
3. Compare the transactions
- Match transactions: go through each transaction on your credit card statement and match it with receipts, invoices, or any internal records.
- Identify missing transactions: make sure every transaction on your internal records is reflected on the statement and vice versa.
You should watch out for:
- Discrepancies in amounts: for example, a receipt shows £50, but the statement says £55.
- Duplicate charges: the same transaction appearing multiple times.
- Unauthorised or fraudulent charges: transactions you don’t recognise
4. Record the adjustments
- Make adjustments in your internal records for any legitimate but unrecorded transactions or differences in the amounts (e.g., currency conversion fees).
- If there are refunds, credits, or chargebacks, make sure these are reflected in both the statement and internal records.
5. Verify the payments
- Make sure that payments made towards the credit card (e.g., direct debit payments) are accurately recorded in both the credit card statement and your bank account statement.
- Check that the payment dates and amounts match.
6. Investigate any discrepancies
If you find any discrepancies, investigate:
- Receipts/invoices: cross-check receipts or invoices with the amounts on the statement.
- Vendor contact: contact the vendor if there’s a charge that you don’t recognise or believe to be incorrect.
- Bank/issuer contact: if necessary, contact your credit card issuer or bank for assistance with unauthorised or fraudulent charges.
7. Finalise the reconciliation
- Once you’ve confirmed all transactions, update your internal accounting records to reflect any corrections.
- Calculate the ending balance from your internal records and match it with the closing balance on the credit card statement.
8. Document the process
Document the reconciliation process for your records, making a note of any discrepancies and how they were resolved. This helps with future audits and keeps a clear financial trail.
And that’s how to do a credit card reconciliation in 8 simple steps.
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If you have any questions about how to do a credit card reconciliation or you just want Capture Expense to handle the entire process for you, we’ve got you covered! Book a personalised demo today.