For hardware-centric, procurement-heavy startups, managing finances can be a real headache. Reconciliation of credit card expenses is a crucial aspect of accounting that, if done incorrectly, can have serious consequences for your business. But fear not, because we have put together a comprehensive guide to help you through the process.
In this guide, we cover everything from what credit card reconciliation is, why it's important, how to do it, and how automation can make the process easier. We understand that as your business grows, the reconciliation process can become more complicated, so we have included tips and best practices to help you streamline the process.
We will show you how to design a credit card reconciliation form and discuss the challenges you might face along the way. We have also included suggestions on how to make the reconciliation process easier, such as switching to a business debit card, issuing one card per person, using expense tracking apps, and integrating procurement software to automate the process.
Our goal is to help you save time and money on your procurement services, so you can focus on growing your business. With our tips and ControlHub's procurement software, you can take the headache out of reconciling your credit card expenses. So let's dive in and discover the most efficient and accurate way to manage your procurement credit card.
So what is Credit Card Reconciliation?
Simply put, credit card reconciliation means that what you've spent matches your budget. Each credit card transaction needs to reflect on your general ledger, including every expense from every account your business uses.
You can do your reconciliation for a small startup if you have a basic understanding of double-entry accounting. But as your business grows, you'll need a finance team to help balance the books.
The reconciliation process aims to get a clear view of your expense report: know who spent how much on what during each billing cycle. If there are any discrepancies in the transaction records, you can easily find out where the problem is.
Monthly reconciliation is always advisable, but sometimes accounting deviations can only come to light during your quarterly or annual reconciliation process. To avoid this, keep every physical or digital receipt as supporting documentation.
Note: Credit card reconciliation involves tracking both your income and expenses. But for this guide, we focus on the expense side to manage your procurement services.
How to Design a Credit Card Reconciliation Form
The main components of a credit card reconciliation form include:
- Dates: Clearly indicate your billing cycle dates. List your expense report in chronological order, beginning with the first purchase in the billing cycle.
- Type of expense: Describe purchases in your card transaction, such as supplies, subscriptions, repairs, and so on.
- Purpose of the expense: Justify why and where you recorded each cost.
- Amount spent: Write the currency figure as it appears on the receipt for each purchase.
- Receipt number: Note the card transaction number on the receipts, including each online transaction through PayPal or Stripe.
- Account number: If you have more than one active procurement credit card, indicate that against the corresponding purchases.
- Total amount: Add up the expenses to compare with your general ledger.
Of course, there are all kinds of reconciliation templates available today. Choosing a purchasing software to monitor all your purchasing card activity is even better.
Challenges of Credit Card Reconciliation
The accounting process should be easy with the aforementioned reconciliation form, right? Unfortunately not. Each card statement would reflect on your ledger and yield a 100% match in a perfect world.
But there are significant accounting challenges that keep this from happening, especially for fast-growing engineering startups. Here are the major pain points you are likely facing with your procurement credit card reconciliation.
- Shared Credit Cards: Reconciliation is much easier when one person handles the procurement process. But as soon as a startup begins to grow, there's a real need for multiple credit cards to support increased demands
- You must keep up with office supplies
- Renew licenses for essential company software, or
- Pay for unexpected hardware repairs and maintenance.
But when more people in a business use company credit cards, the more complicated the reconciliation.
- Hard Copy Receipts: Financial accounting would be a breeze if all expense receipts were entirely digitized. All you need to do is look up your payment history online and automate the entire accounting process.
But when printed receipts and invoices make up most of your procurement process, it gets harder to keep track of each one as they may get misplaced or lost. It also means spending time manually arranging the receipts to match them to your card statement, which is something you'd rather not do.
- Mismatched Card Statement Dates: You rarely activate every additional purchasing card on the same date with the same billing cycle. What usually happens is that each card has its own given process, which means that monthly closing dates can fall at any time.
Reconciliation becomes a headache if you have to delay accounting for one or more cards if they fall outside the quarter or annual reconciliation schedule.
How to Make Credit Card Reconciliation Easier
We finally get to the good part: you can have a painless reconciliation process for your business. Consider these tips to transform your accounting process.
- Skip the Credit Cards: Switch from your procurement credit card to a debit card. Business debit cards work just like credit cards but with one important difference: the spending amount is set beforehand.
You can use your previous card statement to determine a healthy ballpark figure for your monthly expenses, and then cap that amount to your debit card. On top of that, a debt expense is due immediately, so there's no need to pay off the amount over time, like with a credit card. - Issue One Card per Person: A shared company credit card presents many problems, from fraud risks to poor expense monitoring–you can't pinpoint precisely who purchased what. Instead, opt for employee debit cards with different approval requirements for the cardholder. This way, your reconciliation process is easier when you know exactly who is responsible for every purchase in your card statement.
- Use Expense Tracking Apps: Most banks today have great smartphone apps that accompany the cardholder account. Take full advantage of the built-in expense tracking features. These typically prompt you to upload photos of receipts as supporting documentation.
If you forget to snap a picture of your receipt at the purchase point, the app notifies you as soon as the transaction registers. These reminders can also be triggered after a given number of days after payment or for a specific number of late receipt uploads. These app features help you eliminate paper receipts altogether and have accurate receipts for every card statement. - Use a Procurement Software: The final step is to integrate procurement software to automate your reconciliation process. Imagine setting spending limits, creating approval workflows, and processing invoices for every account, all with a click of a button.
A procurement software like ControlHub tracks every credit card transaction in real-time, so your monthly reconciliation takes a fraction of the effort. With virtually no paperwork to deal with, your finance team will happily go through every card statement and generate a thorough expense report for your business.
Learnings
For hardware-centric startups with heavy procurement needs, reconciling credit card expenses can be a challenging and time-consuming task. However, it is an essential aspect of accounting that can make or break your business. To help with this process, we have created a comprehensive guide covering everything from what credit card reconciliation is, to why it's important, how to do it, and how to make the process easier with automation.
Credit card reconciliation ensures that the expenses you've incurred match your budget, with each credit card transaction reflecting on your general ledger. Doing this helps you keep a clear view of your expense report and identify any discrepancies in your transaction records. As your business grows, you'll need a finance team to help you balance the books, but for small startups, a basic understanding of double-entry accounting is sufficient.
Designing a credit card reconciliation form is an essential step in the process, and the main components of the form include dates, type of expense, purpose of the expense, amount spent, receipt number, account number, and total amount. While there are many reconciliation templates available, using a procurement software like ControlHub is a more efficient and accurate way of managing your procurement credit card.
Fast-growing startups face unique challenges with credit card reconciliation, including shared credit cards, hard copy receipts, and mismatched card statement dates. However, there are ways to make the process easier, such as using business debit cards, issuing one card per person, and using expense tracking apps.
Automation through procurement software is the ultimate solution to the reconciliation process. A procurement software like ControlHub can track every credit card transaction in real-time, making monthly reconciliation a fraction of the effort. With virtually no paperwork to deal with, your finance team can generate a thorough expense report for your business.
In conclusion, managing your procurement credit card is a critical aspect of accounting that you cannot afford to overlook. The credit card reconciliation process may be challenging, but with the right tools and knowledge, it doesn't have to be. By following our guide, you can streamline the reconciliation process and focus on growing your business.
Frequently Asked Questions
What is credit card reconciliation, and why is it essential for my startup?
Credit card reconciliation is like making sure your favorite pair of socks always matches - in this case, your expenses match your budget. It's a vital process for your startup's success, ensuring that every credit card transaction appears on your general ledger, making it super easy to keep track of your expenses.
Do I need to be an accounting wizard to handle credit card reconciliation?
Not at all! If you're just starting, you can handle it with a basic understanding of accounting. As your startup grows, you might need a finance team to lend a hand, but don't worry - we've got your back!
How can I create a super helpful credit card reconciliation form?
Think of the form as your treasure map for the adventure! Here are some pointers:
1. Clearly mark your billing cycle dates.
2. Describe your purchases with details like supplies, subscriptions, and repairs.
3. Write a note to yourself explaining why you bought each item.
4. Jot down the actual cost in currency as it appears on the receipt.
5. Don't forget to leave a trail of breadcrumbs with the receipt number.
6. If you use multiple credit cards, keep track of which one paid for what.
7. Finally, add up the expenses and compare them with your general ledger.
Are there alternatives to paper forms for credit card reconciliation?
Absolutely! Embrace the wonders of technology with expense tracking apps and software. They can snap photos of your receipts and store them in the cloud, saving you from the dreaded paper trail and making your accounting a breeze.
What challenges might I encounter during credit card reconciliation?
Every hero's journey has its challenges, and credit card reconciliation is no different. Here are some hurdles you might face and how to overcome them:
1. Handling multiple team members with access to the company credit card? Opt for individual debit cards for your team.
2. Lost receipts causing headaches? Embrace expense tracking apps to go digital and save yourself from the treasure hunt.
3. Dealing with different billing cycles for your credit cards? Stay organized and rely on your superhero finance team to tackle those inconsistencies.
How can I turn credit card reconciliation challenges into opportunities?
Fear not, fearless startup owner! Here are some superpowers to help you breeze through credit card reconciliation:
1. Say goodbye to credit card stress with business debit cards and set spending limits that match your budget.
2. Assign individual debit cards to your team members for easy tracking of expenses.
3. Embrace expense tracking apps for automated accounting and bid farewell to paper receipts.
4. Level up your game with procurement software like ControlHub for automatic tracking, approval workflows, and invoice processing with a simple click.
What benefits can I expect after mastering credit card reconciliation?
By mastering credit card reconciliation, you'll have more time and money to grow your business into the next big thing. Embrace automation, use expense tracking apps, and let technology be your ally. Managing your procurement services will no longer be a headache - it'll be a piece of cake!
Any parting words of encouragement for startup warriors?
You've made it through the credit card reconciliation journey with a smile on your face! Conquer those expenses, keep that optimistic spirit shining bright, and don't forget to celebrate your victories. With the right tools and attitude, you're destined for greatness. Happy reconciling!
