A step-by-step guide to credit card reconciliation

Keeping accurate records is key to running a successful company. For business owners, the credit card reconciliation process is an essential way to ensure your records are as precise as possible. Accurate recordkeeping involves reviewing your credit card purchases and comparing them to your financial records to ensure everything matches up. It helps you keep track of your spending, catch mistakes and spot potential fraud.

Learn more about credit card reconciliation and how to accurately reconcile your business credit cards. 

What you’ll learn:

• Credit card reconciliation is the process of cross-checking your business purchases on your credit card statement with your company’s financial records. 

• To reconcile your business credit cards, start by gathering all necessary documents, check your statement against your financial records and make sure to correct any mistakes.

• You can improve your reconciliation process by setting employee card policies, keeping your records organized and using a business credit card—like one from Capital One—that helps with expense management.

Credit card reconciliation involves checking transactions on your credit card statement to make sure they match your company’s general ledger—or the recordkeeping system that houses all of your business’s financial information. Usually, this is done at the end of each month, quarter and fiscal year. 

To successfully reconcile business credit cards, start by making sure every transaction is accounted for. This means checking to see that the amount, date and type of purchase on your credit card statement match up with your business’s financial books. If something doesn’t add up—like a missing transaction or an incorrect charge—you’ll want to take a closer look and figure out how to fix it.

There are two main types of reconciliation—credit card statements and credit card merchant services. Credit card statement reconciliation involves tracking your expenses and outgoing payments. Credit card merchant service reconciliation focuses on your income and incoming payments. Take a closer look at each.

• Credit card statements: This type of reconciliation examines all the goods and services you paid for with your business credit card, then checks them against your company’s accounting system. Businesses can reconcile credit card statements by making sure the details on the credit card statement align with expense reports.

• Credit card merchant services: This type of reconciliation focuses on the money coming in from customers. It confirms that any sales, returns or fees from your merchant account match up with the deposits in your business bank account. 

Here are the general steps to take when reconciling credit card statements.

Start by collecting all your credit card statements, invoices and receipts for the reconciliation period. Sorting your expenses into categories—like travel or promotional efforts—can help when it comes time to cross-check and review your credit card transactions.

Go through every transaction on your credit card statement and compare it to the matching entry in your accounting records. Check the amounts, purchase dates and descriptions to make sure they match. Always review your statements with a fine-toothed comb to catch any interest charges or other fees.

If you spot any errors or discrepancies between your statement and your financial records, take some time to figure out why they’re there. It could be due to refunds, lost receipts, duplicate charges or even potential fraud.

Take a look at the transactions from your last reconciliation to make sure you’re including all outstanding charges—like pending or in-transit purchases—when you’re working through your current reconciliation.

Once you’ve spotted any discrepancies, it’s time to fix them. Always inform your bank about any errors. If fraud is involved, take the necessary steps to address it.

Once you’ve sorted out any errors and made the necessary fixes, start updating your financial records. At this point, the ending balance on your credit card statement should match the balance in your financial records.

After you finish reconciling, it’s a good idea to have your finance team double-check the statements for extra peace of mind. And depending on how your company is run, you might also have someone like a controller or finance manager formally sign off on the reconciliation. Keeping a record of your process and any changes you made can be helpful if you need to revisit your process down the road.

Here are some potential challenges you might face when reconciling credit cards—and some tips on how to avoid them.

• Using incorrect data: If your records aren’t up to date or data is entered incorrectly, mistakes could occur during the credit card reconciliation process. 

• Missing receipts or invoices: Losing a receipt or invoice for a business purchase can make it harder to accurately keep track of your expenses when you need to resolve a discrepancy.

• Not having a policy for employees: Giving employees access to your business credit cards without instituting clear policies can lead to problems. For example, employees might use the card for personal expenses, or make unapproved purchases that cause discrepancies between your credit card statement and account records. 

• Duplicate transactions: When you’re running a business, especially one with multiple employees, it’s common for expenses to be charged multiple times.

• Manually reconciling credit cards: Reconciling your credit cards by hand can often lead to mistakes. Automating the reconciliation process saves you valuable time—usually with more accurate results.

If you’re looking for a more seamless credit card reconciliation process, here are a few suggestions:

• Regularly reconcile credit cards. Making it a point to reconcile your credit cards on a regular basis can help you stay organized and catch any discrepancies early on. Plus, it gives you a clearer picture of your business’s spending and income—which can help with cash flow management. 

• Keep track of your receipts. Maintaining accurate records is essential to successfully reconciling business credit cards. Try storing paper receipts or invoices in one place so they’re easy to find when you need them. To help manage expenses, you might even consider using a business credit card from Capital One with features like purchase records and itemized year-end summaries. 

• Create company card policies. Before handing out business credit cards to employees, make sure you have clear policies in place for when and how they can use them. For example, to help keep spending in check and avoid misuse, you could require manager approval for purchases.  

• Try automating your process. You might look for ways to automate credit card reconciliation to save time and keep things accurate. There are plenty of tools—like expense trackers and software that creates reports—that can help make the whole process go more smoothly. 

Understanding how to reconcile your business credit cards makes it easier to catch mistakes early and ensure your card statements match your financial records. It also gives you a clearer picture of your expenses, which can help when you’re planning future spending and budgets.

Picking the right business credit card can make reconciliation easier. Explore Capital One business credit cards, which offer expense management tools to help get business done. Get pre-approved today, with no impact on your personal credit score.