The process carried out by companies and individuals alike to reconcile both credit card statements with internal records, like your receipts, invoices, etc., is called credit card reconciliation.
It is recommended to conduct this process every month to identify any problems if they do exist easily but people conduct them depending on their availability and the number of transactions carried out, sometimes weekly, quarterly or even annually.
Some people conduct the credit card reconciliation process manually, but nowadays, a lot of new software has cropped up, which has made this job quite easier. Apart from software, there are even companies to whom you can outsource this whole process.
The 2023 Guide to Credit Card Reconciliation
Collecting Documentation: The first step would be to gather all relevant documentation. This documentation would typically include your credit card statements and any personal internal records you keep for verification or records purposes.
Keep both of these records side by side for ease in reconciliation. Depending on when you conduct your transaction, you can ask for your credit card statement from your provider.
Reviewing Transactions: After gathering all necessary documentation, start the reconciliation process by comparing your internal record transactions with those listed on the credit card statement. While reconciling your records, mark each statement that matches both sources. Conduct this step with focus and concentration to not miss out on any entry.
Identifying Discrepancies: In case you find any discrepancies while tallying, then flag them or mark them with a different coloured pen so that you can investigate them further. Some common errors that might be included are duplicate entries or incorrect amounts.
Many businesses or individuals use accounting software or specialized technology tools to streamline this process. The software or tool quickly identifies discrepancies in your bank and credit card reconciliation statements.
Investigating Discrepancies: After you have identified any discrepancy in the credit card statement, the procedure of investigation comes. To conduct an investigation, gather all relevant documentation supporting your claim of that discrepancy.
This may include making relevant receipts or invoices available to help prove your claim. You can even contact your credit card provider’s customer service to resolve this issue or raise a query. They will best provide additional information or even initiate an investigation.
Adjustments and Corrections: After completing the investigation, make necessary adjustments in your accounting system to correct those discrepancies. This might include adding those journal entries you might have missed and locating those receipts you might have lost. At the same time, ensure that if it is the credit card company’s fault, they issue a statement that will accurately reflect the solved discrepancy.
Reconciliation Reports: A reconciliation report is a report that summarizes the whole reconciliation process. This report is a document in your audit trail and will provide evidence of your financials. Depending upon your or your organization’s size and transaction volumes, credit card reconciliation reports may be performed monthly, quarterly, or even annually.
The more frequently reconciliation is done, it will be for you to detect any discrepancy and catch onto errors. It even helps provide essential cash accounting tips. Make sure that your report complies with the industry standards or the regulatory requirements. If it is conducted for an organization, it has to be about the organization’s standards and any government laws.
Continuous Improvement: Continuously review and improve your credit card reconciliation process based on the previous lessons learned. If you have identified any areas of improvement, then make sure you work on them so that you can improve your cash flow.
At the same time, there is a lot of automation and technology that has come into place for the credit reconciliation process. Make use of financial software and tools that automate the whole process which will reduce the workload for you.
Final overview
In summary, it is essential to note that credit card reconciliation is a vital process which helps an individual or an organization understand its financial accuracy, detect any fraud if possible, exercise control over its expenses and at the same time be compliant with the legal laws and regulations.
If you are looking for an outsourcing company for bookkeeping and accounting services, then Outsourced Bookkeeping is the one for you. They offer a wide range of services, from accounting and bookkeeping to financial management, which will help streamline the process for your organization.