Why automate credit card reconciliation process?
Growing businesses will always have a growing amount of expenses. With this comes the need to manage them in the best way possible and maintain the financial health of your company. An important part of this is the process of credit card reconciliation.
Most organizations and startups that are scaling at a rapid pace often adopt corporate credit cards to provide their employees with the flexibility to carry out their daily expenses. But with this comes the risk of errors and the possibility of fraud or misuse. This is why it becomes necessary for accounting teams to carry out corporate credit card reconciliation.
What is credit card reconciliation?
Credit card reconciliation is the process of making sure that the expenses listed on your credit card statement match up with the expenses recorded in the company ledger. The finance team of a company is responsible for carrying out this activity before paying the credit providers to ensure that there is no discrepancy.
The corporate credit card reconciliation process is a tedious process that involves the finance team members manually going through each purchase made through the credit cards and ensuring they align with the expenses listed in the company account books. This is why many companies choose to use systems that help them automate credit card reconciliation.
Why is corporate credit card reconciliation important?
It can help catch errors in the statements made by providers, or there might be transactions that are missing from the company ledger due to an unexpected situation. Mistakes can happen by any party involved and the reconciliation process helps to solve these issues.
If the corporate credit card reconciliation process is not carried out thoroughly, it can cost your business a huge amount of money. Mistakes can occur for many reasons including system errors where you are charged twice for something, refunds not being processed correctly, and so on.
The reconciliation of credit card statements also helps your business find proof to show for your expenses in company ledgers, which are always ready for an audit; and knowing exactly how much and where your budget is being spent.
How do you automate credit card reconciliation process for business?
Before we dive into how to automate credit card reconciliation, let’s look at how traditional reconciliation works and why there is even a need to automate this process in the first place. The corporate credit card reconciliation process begins when your company receives the credit card statements at the end of each month.
- Receipt Collection: Once you receive the card statement, the finance team must collect all the receipts from the employees that were generated when conducting transactions from the credit cards. These receipts act as proof of the money that has been spent. They come in different forms, the most common being physical paper receipts.
- Reconciliation: Once all the receipts are collected, your finance team has to manually go through each transaction on the card statement and match it with the receipts to verify expense legitimacy. Companies can use certain systems to execute this process, but for the most part, it remains manual.
- Rectification: If there are no errors, then you probably live in a perfect world and can sleep peacefully at night. But chances are, you will find many discrepancies, either from the credit provider or your employees.
If a receipt is missing, then the accountant has to contact employees and figure out whether the transaction took place or not. If it isn’t an issue from the employee side, then the respective authorities of the credit card provider are contacted to rectify the mistake. In both cases, the finance team ends up spending a lot of time and energy in figuring out and resolving the issue.
Automated credit card reconciliation
No one really saw an issue with the credit card reconciliation process for a long time because there was no better way of doing it. Until of course, fintech came along with automated expense management systems.
Many companies in the fintech space now provide you with a software ecosystem to manage your business expenses. Using these platforms your finance team gets the power to automate many accounts payable tasks including credit card reconciliation.
So how that'll work is quite simple. Every time an employee makes an expense using a corporate credit card, it will show up on the expenses dashboard of the software you’re using. The employee can then immediately fill in necessary details about this expense on the platform including the ability to attach an image of the receipt associated with it. This way the expense is automatically matched with the receipt and the finance team can easily access it at any time without having to collect and sort receipts from everyone manually.
To take it a step further, OCR technology within the software is capable of automatic reconciliation. What this means is that the software can scan and interpret important data such as the amount of the expense, the vendor, other necessary details, and match it to the credit card statements. This reduces the amount of time spent by accountants manually checking each transaction.
Advantages of an automated reconciliation process
Improves efficiency
When you choose to use an automated expense management software, the most grateful out of all your employees is going to be the finance team. The fact that they will be able to automatically reconcile credit card statements with company expenses will definitely make them more productive and lead to better outputs.
Saves time and money
Credit card reconciliation is definitely a time-consuming process. And in the business world, time is money. So this task is quite heavy on both accounts. But this is only true if you do it the traditional way. Automation in this case is one instance where it isn’t taking away the accountant's job, but rather making it easier by helping them save time and money.
Prevents fraud & reduces risk
The fact that you can conduct the reconciliation process in almost an instant helps your finance team detect, reduce, and furthermore prevent fraudulent activities altogether. The risk of mistakes like transactions being charged twice and going unnoticed due to human error will also be decreased.
Improves cash flow
Cash flow refers to all the company expenses and income that occur in a certain period. They are an indicator of the financial health of your business. The more transparent and visible in nature they are, the better your financial health. Automated reconciliation helps you streamline a major portion of your accounts payable and thus helps improve cash flow.
Avoid duplication
Duplication might occur either from the credit provider’s end on the card statement or your company’s end due to system errors. Regardless of the source of the problem, when you automate the reconciliation process, duplication errors can be spotted and rectified much quicker as compared to a person manually checking and going through all transactions.
Reduce error on entering data
Everyone makes mistakes. Especially when you have to manually go through hundreds of receipts and match them with expenses in the company books. Using an automated reconciliation system can reduce these errors by at least 90% and make the process much smooth and quick.
Employee satisfaction
When work gets done quickly, accurately, and without much hassle, your employees are happy and have high morale.
Automate expense reconciliation
Within the Volopay ecosystem for expense management, you get physical and virtual credit cards. When these cards are used by your employees for transactions, they are directly recorded on our platform. Now, instead of your finance team having to spend time running around after teams members to collect receipts, your employees directly get to attach the expense receipts from their mobile phones using our app.
These receipts then go through the automated reconciliation process with the card statement using our OCR feature. All of this saves your finance team a lot of time, money, and effort.
