If you are a business aiming for an exponential scale, you might have already built your best team and drafted your best strategies. Most leading businesses are actively adopting corporate credit cards and other business cards as it helps increase their spending capacities.
But, even though there is a marked distinction in the way businesses go about their transactions, the duties of the accounting team largely remain the same. They have to make sure financial records stay accurate, up-to-date, and comply with the regulatory standards. But how can businesses streamline the entire process?
In this article, we will talk about the importance of the credit card reconciliation process. We also look at the common challenges businesses face while going about this process. Lastly, we list possible solutions to address these challenges.
Let’s get started!
Why is the corporate credit card reconciliation process important?
The corporate credit card reconciliation process starts when businesses receive charges for their business expenses. On receiving them, the expense details are manually matched to the company’s internal finance record to look for any discrepancies.
Reconciliation is done to ensure the money leaving the account is equal to the amount spent in one fiscal period. This helps businesses ensure no fraudulent activities get by, and their records always stay audit-ready.
Reasons behind errors in the corporate credit card reconciliation process
- Internal errors due to manual data entry and verifying
- Purchase error associated with merchants and vendors
- A dispute caused by the credit card issuer
- Employees use business cards for personal use
Inaccurately reporting company finances can cause severe problems and penalties. Hence, it is vital for you to identify and resolve these issues quickly.
Major challenges in the corporate credit card reconciliation process
Most companies reconcile credit card expenses with paper-based and spreadsheet-driven methods. This process is not only inefficient but also forces employees to put in long hours of manual labor. This, in the end, only results in more inefficiencies and loopholes in the process.
Some major challenges that accounting teams face when it comes to the corporate credit card reconciliation process are:
Accuracy and efficiency in the entire reconciliation process
Inaccuracy and inefficiencies in the credit card reconciliation process make the company vulnerable to financial exposure. The traditional method includes a high-involvement of employees but does little to remove human-prone errors.
In case an employee uses the card for personal expenses, it needs to be accurately accounted for. When matching the expenses with the bank statements, the employee has to identify and address personal expenses. While reconciling, employees also have to make sure that there are no errors made by the vendors or credit card issuer.
Reconciling traditionally also meant entering data without making an error, as one missing number or double entry can change the entire financial statements. Routinely inputting a massive amount of numbers by an overworked employee is highly error-prone and can affect employee happiness as well.
Curbing an increase in the volume of transactions
Credit cards have helped revolutionize the speed and efficiency of payments in business. But this also implies a high volume of transactions. With the ever-growing number of transactions, the chances of missing human errors, duplicate errors, and inaccurate information also gets higher.
Along with multiple card programs for various employees, departments, and categories, all the data needs to pull and managed under one tab. Your accounting team has to sieve through all the transactions and reconcile one-to-many and one-to-one transactions. This can prove to be a costly and cumbersome expense for your company and employees.
Recognize and correct policy violations
The traditional approach to credit card reconciliation offers no quick and coherent method to find policy violations. Employees have to painstakingly go through every transaction to make sure expenses are following the company’s policies. This is a very time-consuming process and can delay the entire process.
Whenever an employee uses the company’s credit card for personal expense or overspends, there is no way of getting notified unless checked manually. A loose policy framework and weak enforcement of policies can also misinform employees and cause unauthorized purchases. This also increases the chances of fraud and claims to multiple duplicate expenses.
Accounting to a survey conducted by Ernst & Young,
Financial departments spent up to 59% of their resources on managing transaction-intensive processes. Of which 95% of this effort is wasted on transactions that already match rather than on the problem entries that need attention.
How to overcome challenges faced in the corporate credit card reconciliation process
The manual corporate credit card reconciliation process is time-consuming, costly, and laborious. Additionally, if not done right, it can pose a huge threat to the financial health of your business. The modern approach to ensure a high benchmark of accuracy and efficiency is by implementing an automated expense management software.
Opting for an automated solution over a manual system can help your business overcome some of these challenges:
Ways an expense management software can help streamline your corporate credit card reconciliation process:
Save time without manually reconciling card spends
Your team (employees and finance teams) end up wasting a lot of time manually inputting, verifying, and approving business expenses. Sadly, irrespective of all the time and effort they put in, duplicate and fraudulent entries still slip by. This can be negated if you use a software that eliminates manual data entry and manual data verification.
An expense management software gives the ability to extract transaction details from the receipts virtually. Hence, expenses can be submitted, approved, processed, and reimbursed, all without the need for manually entering details. Additionally, with features like one-click approvals and click and drag creation, the chances of human error and human bias also reduce.
Automatic reconciliation of credit card expenses
With an expense management software, all receipts and bank statements are automatically matched and reconciled within a few clicks. This saves the accounting team from having to verify and approve large quantities of transactions.
Additionally, the software helps store all transaction details under one centralized and standardized system. All and any changes get recorded in the form of a digital audit trail. This allows employers and finance teams to gain a cursory view of all expenses, anywhere and anytime. This helps identify and rectify any errors if any. This not only helps streamline the entire process but also facilitates faster reimbursements.
Increase employee compliance with real-time policy checks
Integration with an automated expense management solution helps ensure that all stakeholders remain compliant at all times. An expense management software makes sure the expense policies and guidelines set by the company is in alignment with every expense report or claim submitted by an employee.
In the case of policy violations, the stakeholders are made aware of the flagged expense. Additionally, automatic policy-checks reduce the chance of fraudulent activities, duplicate claims, and overspending by employees. It also reduces the time taken to track any policy violations.
Streamline the entire corporate credit card reconciliation process
Implementing a robust expense management software can save valuable time and quickly identify and rectify errors. It also ensures the company stays ahead with its audit and tax filing. Lastly, it also works as an active catalyst in increasing employee compliance.
The credit card reconciliation process consists of several phases and processes. These processes need to be followed to the dot to avoid any execution errors. Having a clear view of roles and responsibilities helps teams to stay prepared. Additionally, all stakeholders are well-aware of the process; it’s rules and the consequences of not following them. This ensures transparency across the company.
Do you want to streamline your corporate credit card reconciliation process?
Gone are the days where businesses incurred expenses via cheques and drafts. Companies today are actively adopting the usage of corporate credit cards and business cards.
While this paradigm shift brings with it a host of benefits, it also brings a set of challenges. These challenges mainly revolve around the corporate credit card reconciliation process and the documentation, reporting, and approving business expenses incurred on cards.
The corporate credit card reconciliation process is a crucial task for understanding the financial standing of the company. It is also a necessary process to check if your employees are indulging in any fraudulent behavior. Lastly, it helps identify and solve credit card errors and disputes with banks and vendors if necessary.
An expense management software comes in-built with features that make the entire corporate credit card reconciliation process less of a burden. With an automated solution, you can also speed up the whole process while also ticking all the right boxes.