Corporate credit cards are an excellent way for employees to make necessary payments and purchases without complicated internal processes.
They also offer simplified expense reporting, analysis, and rewards like cash-back and travel perks.
But how do you capture all credit card transactions in your accounting records? That's where corporate card reconciliation comes in.
What is corporate card reconciliation?
Corporate card reconciliation ensures that every transaction made with a corporate card is accurately recorded, approved, and matched with your company's financial records.
It involves verifying transactions on corporate credit card statements against employees' expense reports and receipts, and matching transactions recorded in the company's accounting software.
This process ensures that charges are legitimate, properly authorized, and correctly recorded in the company's accounting system.
Regular reconciliation helps businesses detect discrepancies, prevent fraudulent charges, and efficiently manage expenses.
Why is credit card reconciliation necessary?
Some businesses skip card reconciliation, assuming they recorded all business expenses correctly and the credit card charges are accurate. But this can be a costly mistake.
Credit card reconciliations offer several benefits, such as:
Financial accuracy
Employees may lose receipts or forget about certain charges.
Your accounting team might transpose numbers when entering transactions.
A vendor might double-charge you for a single purchase.
Even automated expense matching systems may make mistakes sometimes.
Reconciling credit cards ensures you catch these mistakes and that your financial statements accurately reflect the company's spending.
Budget management
Credit card reconciliation makes it easier to determine how much money the company is spending on things like travel, meals, office supplies, gifts, and other charges employees put on a company credit card.
This helps you track your spending against budgets and identify areas of overspending.
Fraud detection
Without a system in place to track and monitor corporate credit card expenses, fraud can run rampant.
Reconciling corporate credit cards helps you quickly detect and address unauthorized or fraudulent transactions before they cost your business hundreds or thousands of dollars.
More informed financial decisions
You're likely familiar with the term "garbage in, garbage out."
Nobody wants to base company decisions on inaccurate and error-filled financial data.
Corporate credit card reconciliation supports accurate financial records, providing reliable input for making informed financial decisions.
Common challenges in the credit card reconciliation process
The more company credit cards you give out and the higher each employee's credit card usage, the more likely you are to deal with challenges during the reconciliation process.
Here are a few common challenges to be aware of.
Lost receipts and invoices
Employees might lose or misplace invoices or receipts or forget to include them in their expense reports. This makes matching credit card spending to the credit card statement difficult. Make sure you have a system in place for storing and organizing receipts.
Fraudulent charges
Fraudulent charges can happen when employees use a corporate credit card for personal expenses.
Sometimes, this is simply due to an oversight, and they can reimburse the company. In this case, the employee should inform you of accidental misuse immediately.
If it deliberately goes unreported or the employee tries to disguise personal charges, this crosses into fraud territory.
Having a corporate credit card policy, requiring original receipts, and reconciling corporate credit cards can help prevent unauthorized charges.
Manual reconciliations
Manually matching credit card statements to receipts and financial records can be time-consuming and prone to human error.
According to Deloitte, finance teams spend an average of 30-45 minutes on data gathering, manipulation and matching expenses per account each month.
Having several corporate credit cards or abnormally high credit card usage can mean days wasted matching transactions.
Fortunately, many steps in the credit card reconciliation process can be automated using expense management software.
Credit card company errors
Errors can occur on your financial institution's side and in your own records.
The reconciliation process can help you spot errors in your credit card statements, such as duplicate charges, missing refunds for canceled purchases, or erroneous charges and fees.
Best practices for an effective credit card reconciliation process
Here are ten steps to establish an effective corporate credit card reconciliation process for your business.
Implement a corporate credit card card policy
A company credit card policy is a set of guidelines that outline acceptable use of company credit cards.
It should define what is and isn't an authorized expense, when cardholders need management approval for purchases, and procedures for dealing with accidental or intentional misuse.
Limit access to corporate credit cards
Prevent fraud by restricting corporate cards to employees who require them for business purposes.
Giving cards to too many employees or providing very high spending limits can lead to misuse and make corporate cards more vulnerable to theft and abuse.
Set up a system to collect and organize receipts
Ensure all cardholders submit receipts for their transactions promptly.
You can require employees to submit monthly expense reports along with copies of receipts or use an automated expense management system like BILL Spend & Expense to track expenses and provide real-time visibility into credit card expenses.
BILL Spend & Expense also integrates with accounting software and offers a mobile app for real-time expense tracking.
Train employees
Train employees who use corporate credit cards on your policies and reporting procedures.
Regular updates can also be helpful as roles and technology change.
Ensure segregation of duties
Segregation of duties is part of an effective internal control system.
It means assigning various steps in a process to different people to eliminate opportunities for people to engage in theft or other fraudulent activities.
In corporate credit card reconciliation, the person responsible for making purchases on business credit cards should be different from the one who performs the card reconciliation and the one who reviews that reconciliation.
Review and reconcile statements regularly
Assign a regular schedule (e.g., weekly or monthly) for reviewing and reconciling credit card statements, verifying amounts, dates, and payees.
An expense management system can automatically match transaction data with supporting documentation, so you only have to deal with discrepancies like duplicate or unauthorized charges.
Don't ignore your credit card reconciliation or let them pile up for months. Timely reconciliations are crucial for preventing fraud and ensuring accurate financial records.
Review and approve the credit card statement reconciliation
After finalizing the reconciliation, your accounting team should submit it to the financial manager or controller for approval.
Maintain an audit trail
Keep detailed records of all expense reports, receipts, other documentation, and approved reconciliations.
Whether you maintain these records digitally or in printed form, they're crucial for compliance and can help make your annual financial statement audit a lot less stressful.
Generate financial reports
After all credit cards and bank statements have been approved and you complete the rest of your monthly close processes, you can generate financial reports from your accounting software.
The reconciliation process supports accurate financial reporting.
Want to streamline your expense reporting and corporate credit card reconciliation?
BILL Spend & Expenses is an expense management solution that combines free software with corporate credit cards to provide real-time visibility and customizable control over your business expenses.
BILL makes tracking and managing credit card transactions easy, no matter how many credit cards you need.
You can also earn rewards and take advantage of flexible redemption for cash back, travel, statement credits, and gift cards.
Request a demo to find out how you can get better control over your budgeting, spending, and financial reporting today.
Corporate credit card reconciliation FAQs
How often should companies perform corporate card reconciliations?
At a minimum, you should reconcile your corporate credit card transactions monthly.
This cadence aligns with your credit card billing cycle and ensures timely identification of discrepancies or fraudulent transactions.
Businesses with high volumes of transactions may benefit from weekly reconciliations to maintain tighter control over financial records.
Can credit card reconciliation be automated?
Yes, expense management software can automate many of the tasks in the reconciliation process, such as:
- Tracking expenses
- Matching transactions
- Identifying discrepancies
- Generating reports
In most cases, your finance team only needs to get involved if they need to address discrepancies with employees or your credit card company.
What should you do if you discover a fraudulent charge during reconciliation?
If you discover a fraudulent charge while reconciling your credit card statement, report it immediately to the issuer. They can guide you through initiating a dispute and potentially reverse the charge.
The credit card company will also investigate the transaction to determine who is responsible. They may need to cancel the card and issue a new one to prevent additional fraudulent transactions.
