Credit card reconciliation is crucial to a business’s financial management. It is critical for maintaining a firm’s financial integrity, preventing fraud, and complying with accounting standards.
Take Lori, for example. Lori owns a florist, taking orders online and over the phone via credit card, and her two employees each hold a company credit card. Up until now, Lori has taken each statement at face value, not questioning any small discrepancies on a monthly basis, choosing instead to complete a full year’s reconciliation at a time.
But when she begins the most recent year, Lori finds fraudulent transactions on the latest statement. And looking back on previous months, there are similar transactions throughout the whole year totaling thousands of dollars paid for by her business.
Failing to complete an accurate and thorough credit card reconciliation each month - or even quarter - has cost her thousands of dollars and several days of lost income while she cleans up the mess and creates a new policy to avoid falling foul again.
Credit card reconciliation is the process through which businesses ensure that all their credit card activity is accounted for by confirming that transactions recorded in their accounting system match the transactions captured in their credit card statements.
Typically, reconciliation involves matching receipts with the business credit card statement and categorizing expenses to confirm that all transactions match up with the statement entries, ensuring accurate bookkeeping.
Some key objectives of include:
You should communicate with teams – especially credit card users – to ensure appropriate procedures are followed. These include:
Credit card expenses are reconciled by comparing credit card statement transactions against expense receipts. Reports show how the card has been used and ensure all expenses are legitimate, within budget, and essential to the business.
When a business accepts credit card payments from customers, these transactions are also reconciled. Reconciliation reports feed into overall income reporting.
It’s important for business owners to follow best practices when processing a credit card reconciliation. Failure to do so could result in uncertainty around the company’s financial position and/or an increased risk of fraud.
Keeping on top of a business’s finances requires the right tools, strategy and collaboration. PayPal’s expertise and range of solutions can assist in starting a business. Find out how to open a PayPal business account.
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