When employee expenditures with company-issued credit cards are recorded:

Strong internal controls are necessary to prevent mishandling of funds and safeguard assets. They protect both the University and the employees handling the cash.

Safeguarding Cash Link

• Restrictively endorse checks immediately upon receipt stating “For Deposit Only – Syracuse University”
• Keep cash/checks in a locked and secure area until they can be deposited. Access to the area should be restricted to only designated individuals. If a person with custody responsibilities leaves their position, any keys should be collected or combinations changed. Remember that while cash or checks are in your custody you are responsible for it.
• Make timely deposits. The sooner cash/checks can be deposited, the less exposure to theft or loss of funds. Ideally deposits should be made within 24 hours. If amounts are insignificant (less than $100), then deposits can be made weekly.

Recording Cash Receipts Link

• All cash receipts should be recorded immediately by use of a cash register, data entry into a computing system, pre-numbered receipt book, or handwritten log. Receipts can be in manual or electronic format and should contain the amount received, the name of the payer, purpose of the payment, and its form (cash/ check/credit card).
• Provide a receipt. Ideally receipts should be pre-numbered and two-part. One copy should be provided to the payer while the other copy is kept on file. Total deposits can be verified independently by another person by accounting for each sequentially numbered receipt.
• Cash receipts should not be used for petty cash disbursements, check cashing, making change, or for any personal reasons.

Reconciliation Link

• Verify the deposit by agreeing Cash Operations deposit slip to the general ledger on a monthly basis
• Cash registers and credit card machines should be balanced daily. Over/short amounts should be monitored.
• A dated and signed record of the reconciliation should be maintained

Segregation of Duties Link

No one person should be allowed to collect, handle or transport and deposit checks/currency without some additional control feature to ensure that all funds are accounted for. Examples of such controls are as follows:

• The person collecting and recording the receipt should not be the same as that making the deposit. Additionally, a person independent of recorder and depositor responsibilities should reconcile the deposit to the general ledger. If there are only one or two people in the department, a review by management of the reconciliation can provide a compensating control.
• When cash or checks are received regularly in the mail, if feasible, two persons should be present when the mail is opened. One person should total and record the remittances (log). The other should prepare the deposit slip and forward it with the cash/checks to Cash Operations. The deposit slips should be reconciled by a third person to the general ledger.
• Keep transfers of cash from person to person to a minimum. Accountability is lost when several people handle cash before it is deposited. If transfers must take place be sure to document it. If you are the transferor you should get a receipt, if you are the transferee you should verify what you are receiving before you provide a receipt. Use of a drop-off/pick-up log can be beneficial when transporting deposits.

Gifts/Personal Checks Link

• If external gifts directed to the University are received, they should be forwarded to Advancement and External Affairs immediately for processing.
• Personal checks should not be cashed.

Related SU policy: Gift Acceptance Policy

Fees and other Revenues Link

Use an accounts receivable account to process billing and collection for routine revenue activities. If you are unsure if a cash receipt should be recorded as revenue or an offset to an expense, contact General Accounting in the Comptroller’s Office for assistance. Internal controls surrounding this type of activity include:

Post COVID-19, businesses have seen a massive surge in credit card transactions for incoming and outgoing payments. While this made the payment process easier, it also meant a looming nightmare for finance teams at the end of every month – reconciling credit card expenses.  

But where do business owners and finance teams start regarding business credit card management?

This blog discusses everything you need to know about credit card reconciliation, how it works, and why it’s crucial for businesses in 2022. We’ll also address some challenges accounting and finance teams face with reconciliation, after which we’ll give you the easiest way to solve your reconciliation woes. Let’s dive in! ‍

What is credit card reconciliation? 

Credit card reconciliation is the process by which accountants ensure that the transactions in a business’s credit card statement match its general ledger. For accurate and efficient financial reporting, companies need to know that these transactions took place and that the expenses on both sides are correct and valid.

If done manually, accountants sit and compare an organization’s credit card statement against its general ledger. If every payment on both sides matches, they can determine that the ledger was recorded correctly and can close books for the month.

However, if there are discrepancies, the responsibility of clarifying these values would fall on the financial controller. They need to find out who made the additional payments manually.

The reconciliation process typically occurs at the end of every month, while a more significant financial closing happens towards the end of each quarter or financial year.  

What are the different types of credit card reconciliation?  

As mentioned earlier, a credit card transaction can impact two sections of your business finance: income and expenses. This means companies will have two types of reconciliations:

1. Credit card statements

This would include all your business expenses – payments your organization makes for goods or services. For example, if your business is habitually issuing cards to its employees, they must be reconciled individually. 

1. Credit card merchant services

This would include all your incoming payments. Reconciling these transactions takes a little more effort than your outgoing payments, but there are defined ways to make this easier.

In this blog, we’ll only be looking in detail at the business expenses side; that is, transactions made by you or your employees to purchase goods or services for your organization.

Why is the credit card reconciliation process important? 

Making a payment for your credit card statement without a second glance may not be the wisest thing to do. Big financial institutions make mistakes too, and it can end up costing you a lot more than what you should be paying. 

The reconciliation process starts when a business receives statements for its expenses. The expense details are then manually matched with the company's internal finance records and checked for discrepancies. 

This process ensures:

• The money leaving the account equals the amount spent in one fiscal period. 
• No fraudulent activities or manual data entry mistakes get by.
• The company’s records always stay audit-ready. 

How to reconcile corporate credit card expenses?

Reconciliation, as we know, involves the process of matching expenses with your internal finance record. But how do you go about the entire process?  

Step 1: Collecting and sorting receipts

Receipts are proof of expenses. It comes in several forms and helps account for money spent. For example, a purchase made using a credit card comes with an invoice given to the customer at the time of sale. These receipts should be collected from all the cardholders and stored for future reference.

Companies ideally use T&E expense reports to collect and store employee receipts. This can be done manually using paper-based excel sheets and reports or by automation-driven tools like an expense management software.

Step 2: Matching expenses to transactions

Finance teams should match credit card statements to reported business expenses with the receipts. Businesses can do this with the help of any preferred system for reconciling. 

Pro tip: Ensure that other than fees and interest charges, there shouldn't be any other unmarked items in the credit card statement.

Step 3: Notifying your bank in case of errors

There are always chances of error, either with or without intention. Thus, your finance teams need to be careful in identifying and notifying the bank authorities in cases of mistakes. In addition, ensure timely action by reporting any unauthorized activities or fraudulent behavior.

Some examples of commonly occurring errors with business credit card reconciliations are:

• Refund for a canceled purchase 
• Charged for a failed transaction 
• Bill payment processed twice, leading to duplicate charges

SUGGESTED READS: 

• How to manage receipts effortlessly (For the modern employee)

3 challenges finance teams face with the corporate credit card reconciliation process

Most companies reconcile credit card expenses with paper-based and spreadsheet-driven methods. Unfortunately, this process is inefficient and forces employees to work long hours of manual labor. This also results in more inefficiencies and loopholes in the process. Given below are some challenges that can hinder your finance team's progress:

Ensuring accuracy and efficiency in the entire reconciliation process

For employees, reconciling corporate credit card expenses means entering data without making an error. Even a single missing number or double entry can put the employee's reimbursement on hold. Also, routinely submitting expense reports to get back their own money can affect employee happiness. 

For finance teams, inaccuracy and inefficiencies in the credit card reconciliation process make the company vulnerable to financial exposure. Also, the traditional reconciliation methods include a high involvement of employees but do little to remove human-prone errors. 

Curbing an increase in the volume of transactions 

Corporate credit cards have helped revolutionize the speed and efficiency of business payments. But this also implies a high volume of transactions. Moreover, the ever-growing number of transactions increases the chances of missing human errors, duplicate submissions, and inaccurate information. 

Your accounting team has to sieve through all the transactions and reconcile one-to-one and one-to-many transactions. This can prove to be a costly and cumbersome expense for your company and employees.

Recognizing and correcting policy violations

According to a survey by Ernst & Young, financial departments spent up to 59% of their resources on managing transaction-intensive processes. Of this, 95% of the effort goes into already matching transactions rather than ones with entry-related problems.

The traditional approach to credit card reconciliation offers no quick and coherent method to find policy violations. Instead, employees must painstakingly go through every transaction to ensure expenses follow the company's travel and expense policies. This further adds to the delay. 

Financial leaks because there's no way of flagging personal expenses

Whenever an employee uses the company's credit card for personal expenses or overspends, there is no a way of getting notified unless checked manually. Additionally, a loose policy framework coupled with weak enforcement of T&E policies can misinform employees and cause unauthorized purchases. This also increases the chances of fraud and claims of multiple duplicate expenses. 

For employees who use the card for personal expenses, there must be a way to flag violations accurately. For example, when matching the expenses with the bank statements, the finance team has to identify and address personal expenses. While reconciling, finance teams also have to make sure that no errors by vendors or credit card issuers get by. 

How to address your reconciliation challenges 

The manual corporate credit card reconciliation process is time-consuming, costly, and laborious. Additionally, if not done right, it can pose a massive 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 these challenges:

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, regardless of their time and effort, duplicate and fraudulent entries still slip by. You can negate this by using a software that eliminates manual data entry and manual data verification.

An expense management software can extract transaction details from the receipts virtually. Hence, expenses can be submitted, approved, processed, and reimbursed, all without the need for manually entering details. Therefore, the chances of human error and human bias are also drastically reduced.

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 manually verifying and approving large quantities of transactions.

Additionally, an expense management software helps in the following ways:

• View and store all transaction details under one centralized dashboard.
• Record all and any changes in the form of a digital audit trail. 
• Enable employers and finance teams to gain a cursory view of all expenses
• Identify and rectify any errors before payment processing.
• Streamline the entire process and also facilitate faster reimbursements. 
• Access information using any device from anywhere and at any time.

Increase employee compliance with real-time policy checks

Integration with an automated solution helps ensure that all stakeholders remain compliant at all times. A TEM software ensures the company's expense policies and guidelines are aligned with every expense report claim submitted by an employee.

In the case of a policy violation, an automated expense management software will:

• Notify all stakeholders of a flagged expense. 
• Run automatic policy checks to reduce the chances of fraudulent activities, duplicate claims, and employee overspending.

This reduces the time taken to track and resolve any policy violations.

Streamline the entire corporate credit card reconciliation process

Implementing a robust expense management software can save valuable time and quickly help identify and rectify errors. It ensures the company stays ahead with its audit and tax filing. It also works as an active catalyst in increasing employee compliance.

The credit card reconciliation process has several phases and cycles. Finance teams must follow these processes to the dot to avoid execution errors. In addition, having a clear view of roles and responsibilities helps teams to stay prepared. 

Lastly, when all stakeholders know the process, rules, and consequences of not following them, it fosters a work environment of honesty and transparency across the company.

Do your accountants need to wait till the end of the month for credit card reconciliations? 

Just imagine how much easier their lives would be if these transactions were recorded and matched in real-time.

Pretty sweet, right? That’s precisely what we do at Fyle.

Fyle launched a real-time expense management solution for customers who’re using SMB and corporate cards in the U.S, starting with Visa. This makes us the first spend management platform to offer direct transaction feeds to any Visa-powered credit card users from any bank. 

What does this mean? Any SMB or mid-market company can now access the benefits of an expense management software without changing their cards.

Businesses can now keep track of card spending as it happens while still having granular level control on any Visa card they use. 

In conclusion 

Don’t you think it’s time to change the way your business manages credit card spend? Why make your accountants wait till the end of the month for reconciliations?

Change how you manage card spend with Fyle’s new Visa RTF.  You gain access to direct transaction feeds which helps you get notified of card spend seconds after you swipe your Visa credit card. Additionally, you can also collect receipts in real-time via text, which reduces your dependency on bank feeds. 

Which of the following is considered cash for financial reporting purposes?

Which of the following would not need to be accounted for in a bank reconciliation?

Which of the following items would cause the balance of cash in the bank statement to be different from the balance of cash in the accounting records?

Which of the following is considered cash for financial reporting purposes quizlet?