A Complete Guide on Credit Card Reconciliation Software

The success of any business or company is dependent on clean books of accounts. Keeping accurate and up-to-date books of account is also a legal requirement that companies must adhere to. The advancement in technology has revolutionized the way we make payments for our goods and services, and thus, there has been increased use of cashless payment systems. Disruptions like the COVID-19 pandemic were a blessing for the global adoption of cashless transactions. Therefore, businesses of all sizes have witnessed a surge in cashless transactions, especially credit cards, in the past two years. However, with the remarkable ease of making payments comes the complexity of reconciling the credit card with the company's general ledger.

What is Credit Card Reconciliation?

Credit card reconciliation refers to verifying if the transactions made with the credit card match the transactions recorded in the company's general ledger. For effective and accurate bookkeeping, you need to verify and ensure that transactions on both sides are correct and valid. Thus, credit card reconciliation is crucial in ensuring the integrity of your company's books of account. 

However, credit card reconciliation, with its simple objectives of enhancing the integrity of the company's books of accounts, can be an arduous affair if done manually. Besides being daunting, manual credit card reconciliation is also likely to be bound by human errors since it involves the comparison of multiple transaction histories. That is why Credit Card Reconciliation Software is available in the market for use by individual businesses and companies to fast-track their credit card transactions.

What are the Types of Credit Card Reconciliation?

There are only two types of credit card reconciliation available, and they relate to expenses and income. These are:

  1. Credit card statements. Here, your company’s credit card payments for goods and services are reconciled using monthly statements from your credit card. Thus, if your company has dispatched credit cards to managers and executive staff, you should ensure that all of them are reconciled during the reconciliation process. Therefore, this type of credit card reconciliation relates to the expense side.
  2. Credit Card Merchant Services. If a customer pays you for goods or services using a credit card, that payment is usually processed by your merchant account provider. The merchant account provider acts as an intermediary between the point of sale where the transaction takes place and your bank account. Thus, it relates to the income side of your company. While reconciling these particular transactions might be trickier than credit card statements, this will be the least of your worries if you get the proper reconciliation tools.

What are the Benefits of Credit Card Reconciliation Software

The benefits of adopting a credit card reconciliation software cannot be emphasized enough. Here are some of the benefits that your business or company is guaranteed when you use credit card reconciliation automation:

  • Streamline Reconciliation Process. Keeping a clean account record is a legal requirement that often compels companies to do credit card reconciliation hurriedly. However, with reconciliation software, there is an increased reduction in crucial person dependencies and drawbacks arising from repetitive steps of the reconciliation process.
  • Optimizes and Standardizes the process. With globalization being a reality in the current economic dispensation, organizations and companies tend to be spread out in location. Therefore, with the capabilities of technology, your financial experts can execute the company's tasks like credit card reconciliation from a different location. Fortunately, with reconciliation automation tools, the process is highly standardized and thus easy to optimize to meet your organization's goals.
  • Internal Controls. Your company’s human management teams gain better internal control when you use credit card reconciliation software. Thanks to periodic system alerts and notifications, they can detect and resolve any anomalies that might arise during the reconciliation process.
  • Save Time. Credit card reconciliation involves extensive data which has to be pulled together, structured properly for review, reviewed, and shared with the correct data. Reconciliation software does all these processes within seconds, thus maximizing capacity and saving time.
  • Reduce Fraud. Credit card reconciliation allows your organization to spot any discrepancy in the transactions done using your credit card in the recent past. Thus, it enables you to spot any fraudulent activity in your company. The use of reconciliation software enhances the timely reconciliation process, which can be instrumental in identifying various discrepancies. Hence, saving your company from suffering massive financial losses.
  • Reduced Error. Humans are bound to make mistakes from time to time. Such errors are likely to happen regularly when dealing with colossal data that requires one to keep attention to detail. Credit card reconciliation software helps reduce errors arising from the reconciliation process, thus maintaining the integrity of your company's books of account.
  • Enhanced Transparency. With reduced errors and fraud, the transparency of your organization's financial history will be significantly improved. This is because you do not need to organize meetings and check-ins to know the status of the credit reconciliation process. All you need to do is log into the system and check how the process has been conducted.
  • Improved Confidence in Data. Even if the best accountants and financial experts manually do your company's credit card reconciliation, there will be some margin of error and doubt. If your company uses the right software, you can be sure and confident that the process and the data forwarded to you is verifiable, accurate, and valid.
  • Increased Employee Satisfaction. Most employees involved in manual credit card reconciliation allude to the fact that it is a laborious and tedious exercise. Therefore, if you adopt reconciliation software as an organization, your employees are likely to free up their time and engage in other assignments, thus enhancing the firm's productivity. 

What are the challenges often faced in Credit Card Reconciliation?

Credit card statements or credit card merchant services would automatically match the general ledger in an ideal state. However, this is always not the case as various complications arise during credit card transactions. One of the complications encountered is that sometimes when company staff is given credit cards for corporate travels, they use them for personal purchases. This can cause a discrepancy during the reconciliation process. Therefore you need to be vigilant of such occurrences though they are rare, as the employee might be forced to pay for the personal purchase. Another major challenge is that you may need extra credit card reconciliation to capture the transactions between the statement date and month-end since the credit card closing date does not coincide with the end month.

Key Takeaways

  • Keeping accurate books of accounts is a legal requirement that businesses and companies must adhere to.
  • Cashless transaction is soon becoming the new normal in purchasing goods and services due to the advancement in technology.
  • Credit card reconciliation is verifying whether the transaction made with your credit card matches the records on the general company’s ledger.
  • There are two types of credit card reconciliation: credit card statements (expenses) and credit card merchant services (income).
  • Credit card reconciliation is essential in maintaining the integrity of your company’s books of accounts, reducing error and fraud.
  • Credit card reconciliation software refers to automation tools that are instrumental in simplifying the credit card reconciliation software.
  • Adopting reconciliation software has various benefits like standardization and optimization of a reconciliation process, increased internal controls, improved employee satisfaction, and enhanced confidence in the company's financial data.
  • The use of credit for personal purchases and the lack of an end date for credit cards are significant challenges companies face during the credit card reconciliation process.

Final Takeaway

With the rise in the use of cashless transaction options, companies must be ready to deal with the complexities likely to be encountered during credit card reconciliation. Therefore, it is imperative that you acquire reconciliation software for your company and business to save time used in the whole process and enhance accuracy and efficiency. If you need credit card reconciliation software, contact ControlHub to get started today.