Guide to Corporate Credit Card Reconciliation

Guide to Corporate Credit Card Reconciliation
Contents

As businesses embrace going digital, credit card transactions have become more common on both the income and spending fronts. 

Credit card reconciliation is necessary to ensure that credit card statements match your company’s general ledger. Unfortunately, this reconciliation process can be complicated and time-intensive. The high volume of transactions made possible by credit cards and the tedious nature of the verification process is enough to make you long for simpler times.

Accurate bookkeeping is both a business best practice and compliance necessity, so understanding this process is a must. 

Why you need to reconcile corporate credit card statements

In a perfect world, credit card statements and general ledger accounts would always match. But anyone with business experience knows that systems seldom work perfectly.

Paying off your credit card statement without a thorough check can end up costing you more than you should be paying, and every dollar counts.

Reconciling your credit card accounts serves your business in several key ways:

  • It confirms that actual expenses match the funds leaving the company’s account at the end of a fiscal period;
  • facilitates an accurate record of liabilities of the business;
  • prevents errors in financial statements;
  • identifies and prevents fraudulent activity or misappropriation of company cards; and
  • keeps company records ready for audit.

To that last point, tax law expressly prohibits deductions for T&E expenses without proper substantiation and verifying credit card expenditures can help catch any issues. 

Credit card reconciliation is a bit like flossing. It’s a pain, and nobody really wants to do it, but by making it a habit, you save yourself a lot of money and pain down the road. 

How to do a credit card reconciliation

As with any process, a clear workflow will save time, money, and potential frustration. 

Step 1: Obtain credit card transactions 

The first step is to obtain all of the transactions from your company’s various credit card accounts.

This can be done either by importing credit card transactions via software integrations or manually uploading bank statements into your accounting software. 

For the mental wellbeing of your accounting team, we highly recommend avoiding manual uploads. 

Step 2: Allocate expenses to a certain employee or team

Now that you have all of the expenses, you need to determine who spent what. 

If you are still dealing with frustrating expense reports, you will need to sort through your reports and determine which department or individuals are responsible for the various expenses listed in the report.

Step 3: Collect and sort data and documentation

Next, you need to collect necessary documentation such as receipts and credit card statements.

This can be a bit of a pain, chasing down employees and receipts. However, spend management solutions can help to eliminate this headache and make the process significantly more efficient. 

You’ll also need to categorize all of the expenses and ensure that they comply with your company’s travel and expense policy.

 Step 4: Compare the transaction amount on expense receipts to the outgoing amount in the corresponding account

Time to validate the expenses. 

Double-check that all of the expenses actually took place and that they comply with company policy. Validating ensures that your books are clean, preventing fraud or simple mistakes that could lead to potential legal woes.

Step 5: Address any policy violations

If there are any policy violations, be sure to address them immediately. Discuss them with the offending party to determine whether it was a simple mistake or an attempt at fraud. 

Policy violations should ideally be rare but must be addressed. A simple conversation can clear up a misunderstanding and prevent having to do it all again in future reconciliation processes.

Step 5: Process card transactions in the general ledger

Now that all expenses have been validated and any potential issues addressed, you can add the transactions into your company’s general ledger. 

By validating and addressing issues before adding expenses to the ledger, you ensure that the general ledger remains a solid and accurate foundation for your company’s financial systems.

Common challenges of corporate credit card reconciliation

There are a lot of moving pieces in the reconciliation process, and, as a result, several common challenges arise. 

The process is time consuming 

The credit card reconciliation process can be tedious and time-consuming. This goes double if your company is still paper-based and doing things manually. 

Accumulating expense data, allocating all expenses to the correct party, and then verifying each expense is a massive task when done manually. 

Accounting teams typically dread this process because they know to expect full days of data entry and chasing paper trails. 

Additional pressure for your finance team

Credit card statement dates also rarely coincide with the end of the month. 

On top of the time-consuming nature of the process, the teams responsible are usually under pressure to get financial statements out as quickly as possible in between the statement date and month-end close. 

This means that financial teams manually inputting data are responsible for a substantial task in a short time frame. It’s no wonder they don’t look forward to it. 

Sharing cards

Many companies allow employees to share credit cards, which can be problematic.

First, sharing cards makes it extremely difficult to sort out who spent what and assign expenses to the correct departments and employees.

Also, if receipts are missing, it can be nearly impossible to know who to chase down. A similar situation arises if actual payments are incorrect.

It is challenging to address issues if you can’t find the responsible party. Card sharing adds another layer of complexity to an already complex process. 

Multiple payment channels 

There is an ever-increasing number of payment channels available these days. Google, Apple, Amazon, and the rest are all creating payment options.

While this makes it easier for consumers, it also makes it more difficult to track expenses. 

The more payment channels your employees use, the more sources of transaction data your accounting team will need to sort through to reconcile the general ledger.

Personal expenses

While this should ideally be rare, an employee or two will inevitably use the company card for personal expenses. 

However, any breach of policy must be identified, addressed, and reconciled. Unfortunately, traditional approaches to credit card reconciliation offer no quick solution to this problem.

Employees must painstakingly verify each expense and make sure they align with the company’s travel and expense policy. 

Cutting through the reconciliation process

Discussing the credit card reconciliation process with an accountant who has had to go about it manually is known to induce sweating, nausea, and an overall sense of dread.

Luckily, times have changed. 

The services offered by Lola.com systematically solve every reconciliation challenge that vexed accounting teams of the past.

Expenses are automatically categorized

One of the most tedious parts of credit card reconciliation is categorizing each and every expense. 

Lola.com automatically tracks and categorizes every expense, freeing your accounting team up for more important tasks.

Accounting software integration

Import transaction data from Lola.com directly into your own accounting software to make the process even more efficient.  

Integration is already available for QuickBooks, with Xero, Oracle, NetSuite, and Sage Intacct all coming soon.

All transactions in one centralized system

As your business grows, so too will the number of transactions.

More transactions means more complexity. Unless all of those transactions are housed within one, easily accessible, centralized system. This is a scalable solution that only becomes more useful the more your business grows.

Real-time transaction data

One of the biggest issues with the reconciliation process has always been the time crunch: trying to get large amounts of financial data consolidated and verified for the month-end close. 

With Lola.com, your finance team can view transaction data in real-time. Issues or errors can be immediately addressed as they occur instead of retroactively all at once. 

Virtual cards

Lola.com also eliminates issues arising from card-sharing by supplying every employee with a virtual card. 

Every transaction is tracked by the virtual card, so if there are any discrepancies, it is a simple matter of checking whose card it came from. 

Eliminate expense reports entirely 

Say goodbye to chasing down receipts and paper trails.

With a company-wide rollout of virtual cards, Lola.com’s spend management system eliminates the need for expense reports, effectively eliminating one of the most notorious aspects of the credit card reconciliation process.

Shoring up company accounting

Credit card reconciliation is a critical task for your company’s financial security. It allows you to identify any potential issues with your bank account or, even worse, the IRS. 

Reconciliation can also be a massive pain.

Relying on the traditional, manual methods of the past creates a complicated and tedious process sure to drive your finance team crazy. 

Luckily, Lola.com is here to help with digital tools that eliminate the headache. 

Trust us, your finance team will thank you. 

Lola.com is the spend management solution that keeps you on budget.


About the Author: Anna Yen
Anna Yen, CFA, has nearly 2 decades of experience spanning financial markets, cryptocurrencies, and digital marketing. Currently she manages digital assets at FamilyFI, working to empower families with financial literacy.