Are There Other Types of Reconciliation?

Reconciliation is performed in a number of different ways. In addition to credit card reconciliation, other forms of reconciliation include:Bank reconciliation involves the business reconciling its own financial statements with the statements it receives from the bankA vendor reconciliation will compare statements provided by the vendor or supplier with the business’s own accounts payable ledgerIntercompany reconciliation is the process of reconciling statements and transactions between units, divisions, or subsidiaries of the same parent companyBusiness specific reconciliation involves the reconciliation of accounts in a specific business unit, such as a stock inventory or expenses reconciliationPetty cash reconciliation is the process of verifying that all transactions in the petty cash fund are accurate and substantiated

What Are the Two Basic Methods of Account Reconciliation?

Account reconciliation is typically done at the end of an accounting period, such as at the time of the monthly close. This ensures that transactions that are being closed out are properly verified and that the closing statements are accurate.There are two basic types of account reconciliation:A business can perform account reconciliation by reviewing documents. This is done by examining transactions in the business’s own financial records and comparing those with source documents, such as receipts, invoices, or statements.A business can also perform account reconciliation by doing an analytics review. This is done by performing a historical analysis and comparing this to current data. If present accounting figures are widely different from projections made from historical data, this may be a sign of irregularities.

Why Is Credit Card Reconciliation Important?

Credit card reconciliation is an essential business accounting function. It helps businesses address a number of fundamental objectives in their accounting processes.All businesses must identify errors, whether they occur in data entry, at the bank account level, because of omission, lack of information, duplication, or for some other reason.Credit card reconciliation helps identify fraud and unscrupulous spending by employees. All businesses are vulnerable to unscrupulous employees, cyber-theft, dishonest customers, vendors, or suppliers. Account reconciliation can help prevent fraudulent activity by identifying such common practices as duplicate checks, unauthorized credit card activity, or altered invoices.Credit card reconciliation is an important process to ensure the validity and accuracy of all financial statements. Individual transactions are the building blocks of financial statements produced by the business. It is imperative for the business to verify all transactions before they are relied upon to produce those statements.

Credit Card Reconciliation

What Is Credit Card Reconciliation?

Credit card reconciliation is the process of matching corporate credit card transactions recorded in the general ledger against credit card statements and employee expense reports to verify that all charges are accurate, authorized, and properly classified. It is a key internal control over employee spending.

BlackLine automates credit card reconciliation by ingesting statement data, matching transactions against ERP records, and flagging unmatched or suspicious items for review—replacing a manual, time-consuming spreadsheet process with a continuous, auditable control.

How Is Credit Card Reconciliation Performed?

There are two different types of credit card reconciliation:

Credit card statements for purchases by employees with company credit cards
Credit card purchases by customers that are processed through a merchant account

Reconciling Employee Purchases on Company Credit Cards

In the case of credit card statements for purchases made on company credit cards, the reconciliation involves several steps.

The first phase of reconciliation is to gather all supporting documents. If a business has many employees who utilize company credit cards, all of their receipts, invoices, and purchase statements must be gathered at the same time to perform the reconciliation.

The next step is to reconcile the supporting documents with the journal entries in the business's accounting ledger.

Then, the business will compare journal entries in its accounting systems with the credit card statements.

When reviewing credit card statements, business accountants will also make sure that all fees and interest have been properly recorded.

All credits and payments will also be confirmed.

Finally, purchases recorded in the credit card statements will be compared to those recorded in the business’s own general ledger.

Timing is sometimes an issue, as credit card statements do not necessarily match up exactly with the beginning and ending dates for the business’s accounting period.

In these instances, multiple, overlapping credit card statements may need to be reconciled when closing a particular accounting period.

Reconciling Customer Purchases By Credit Cards

In the case of reconciling credit card purchases by customers, the process is not drastically different, except that in this case, the business is on the receiving end of the purchase.

There are some issues unique to this type of credit card reconciliation. For example, some credit card processers charge a fee for transactions, which may be deducted from the payment. Timing and formatting issues in the way that a merchant account provider reports transactions may complicate the reconciliation process. Finally, merchant account credit card reconciliation helps the business identify charge backs, or disputed and refunded charges by customers, so the business can make the proper adjusting journal entries.