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Credit card reconciliation – everything you need to know

Ross McGee
Ross McGee
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min
2024-06-14

Credit card reconciliation is an important part of the overall reconciliation process for financial teams of every company type and size. In fact, with the number of credit card transactions continuing to rise year-on-year, its importance is only increasing. 

Considering, too, that credit card statement reconciliation must also be managed for internal expenses as well as customer transactions, it’s absolutely paramount that this process is one that can be done thoroughly and accurately throughout the year.

So what is it, what problems relate to it, and how can it be completed efficiently?

What is credit card reconciliation?

Like all forms of financial reconciliation, credit card reconciliation refers to the process of cross-referencing transactions. In this case, credit card statements against a company’s internal ledger. This enables financial teams to keep clean books, providing a solid foundation for a productive financial team – and ensuring legal compliance. 

Why is credit card reconciliation important?

As a finance team, when you’re already overstretched and burdened by heavy workloads it can be all too tempting to opt out of reconciling the high number of credit-based transactions that come through (both from customers, and internally from credit card-based expenses). Unfortunately, this is not a sensible option as it can lead to a variety of adverse outcomes. 

When left unreconciled, you might find that internal spending spirals out of control as you can’t keep proper tabs on your credit card expenses. You will also be left vulnerable to inaccurate reporting, potential headaches around exception investigation, and even fraud. 

This is why it’s essential that all credit card transactions are properly and regularly reconciled. Timely credit card reconciliation keeps you and auditors confident that you have everything managed and you’re fully compliant with the financial standards you’re legally obligated to adhere to. 

How to reconcile company expenses on credit cards

Today, many organisations use a company credit card for expenses of all kinds. This form of payment allows companies to have flexibility with funds to pay for both necessities and revenue-generating activities, from employee travel expenses to advertising costs. 

When it comes to credit card statement reconciliation, there will therefore often be a whole range of transactions featured on a credit card statement that need to be checked against a company’s own accounting books. Although these expenses will be recorded in a variety of forms - invoices, receipts, etc. - they should still all be stored on a company’s financial system.

These two streams of transactions – from the credit card statement and the company’s internal ledger – can then be compared in the manner of a standard reconciliation to complete credit card statement reconciliation.

How to reconcile customer purchases by credit cards

Of course, it is in the nature of credit card transactions that customers are technically spending money that is not theirs – instead,  they are using “credit” that is loaned to them by the credit card company, which they can then pay back within a certain time frame to avoid interest costs. 

Because of this setup, some might mistakenly believe that there is a delay in the payment from the customer actually coming through, but this is not the case. In most instances, funds from credit card transactions are still transferred promptly from processors such as WorldPay. This means that credit card merchant services can still be reconciled as normal with internal records without needing to allow for any time for potential processing delays.

Common credit card reconciliation problems

Inevitably, credit card reconciliation can present a number of challenges and issues. Here are a few of the most common problems faced: 

Shared company credit cards

It is not practical for companies to hand out credit cards to every single employee who might at some point need one. This is why many organisations will have one or more shared credit cards that are used by multiple people within the company. The problem with this, is that it can make it tricky for financial teams to know who to chase when receipts are missing, having a knock-on effect on completing reconciliation considering that a crucial piece of intel remains missing.

Lost receipts

Of course, everyone does their best to stay organised and keep hold of receipts that may later need to be checked, but accidents happen. This can cause a whole plethora of issues come time for reconciliation.

Diverse data points

If we consider the process taken during a conventional B2B transaction, it quickly becomes apparent that there are a variety of data points which need to be recorded for accurate reconciliation to go ahead after a company credit card transaction is made. 

In this case, a supplier invoice is processed by your accounts payable system and paid via credit card. From this single transaction, you then have a record on your company credit card statement as well as a receipt received upon completion. By the end of one transaction, you’re therefore left with an invoice, a receipt, and a transaction on a credit card statement. Yet every piece of data must be safely stored and easily accessible - a seemingly simple task on paper but one that is prone to error due to increased chance of things going missing when there is a high number of data sources, especially if there’s no central storage hub in place.

Manual reconciliation

Once upon a time, manual reconciliation was the only way to reconcile transactions of any type, but these days there is luckily also the choice to automate it – something that more and more organisations are opting for. Given the time-consuming nature of manual reconciliation, it’s not hard to see why. After all, it is a lengthy and arduous process to cross-reference credit card statements with internal financial records, and the longer it takes, the bigger the scope for mistakes to arise.

Timing complications

In an ideal world, credit card statements would arrive in time to allow for typical back-off financial cycles which usually take place at the end of the month. However, it is unfortunately the case that credit card statements often arrive a few days after this point which can disrupt the routine many financial teams adhere to in order to stay on top of their reconciliations. What’s more, employees are not always timely in actually claiming their expenses – something which can also cause disruption when attending to credit card reconciliation. 

How to optimise credit card reconciliation

So, those are the problems – but how can finance teams actually go about optimising their credit card reconciliation process so that they can free up time, and also rest assured that it’s all being handled accurately? Well, as is so often the case these days, technology is the answer. 

Receipt apps are incredibly useful for immediately getting receipts on file before there is a chance for them to go awry – instead, they are uploaded instantaneously into a finance system’s employee expense nominal so they can later be easily reconciled with the credit card statement when it eventually comes through. 

Reconciliation software such as Aurum can also be incredibly beneficial in addressing many of the above issues by automating the credit card reconciliation process. For example, Aurum can take the pain out of importing credit card statements (something which can often take a long time due to a high number of transactions) via its numerous APIs and scheduler. Together, these features along with Aurum’s unrivalled matching rate mean that credit card reconciliation can actually be completed automatically even out of working hours whilst finance professionals are away from their desks. Upon their return to work, they will simply be left with a handful of exceptions to investigate or not at all, safe in the knowledge that with no human intervention having taken place, the numbers in front of them are error free. 

Take the credit for simple reconciliation

While credit card statement reconciliation might have once been a sinkhole for time and resources for many finance teams, it can now become something much more seamless and efficient with proper preparation and automation from Aurum. Doing so frees up time for more important work, allowing teams to perform at their best and continue to scale and grow alongside the broader company or organisation. 

Book your Aurum demo today.

Ross McGee
Author
Ross McGee

Content and Community Marketing Manager

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Ross McGee is a marketing manager at Aurum Solutions who deep dives into financial processes, technology, and best practices to share insights that help finance professionals of all levels maximise their potential.

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