Credit Card Reconciliation for Engineering Startups: Everything You Need to Know
Let's face it: if accounting isn't your strongest suit, then it's a total pain. And even if you have a bookkeeping background, managing your engineering startup takes up precious time as it is. But you need clean books for your business to thrive, so you just have to fill out your credit card reconciliation form every month.
This guide will cover everything you need to know about the reconciliation process:
- What it is
- Why it's important
- How to do it, and
- How automation can take the headache out of your expense tracking
Discover the most efficient and accurate way to manage your procurement credit card below.
- A credit card reconciliation form helps track your procurement expenses against your general ledger.
- Fast-growing startups face serious but avoidable challenges with account reconciliation.
- Procurement software is the best integration for real-time account reconciliation for startups.
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.
Your reconciliation process doesn't have to feel like pulling teeth. With these great tips, plus ControlHub’s procurement software, you can save plenty of time and money on your procurement services. Focus more on streamlining your engineering operations and let the procurement software handle the rest. Get your free demo today to discover how ControlHub improves your startup outcomes.