In today’s digital environment, 75% of consumers are using some form of electronic payment. This includes 33% of consumers who prefer using credit cards. Although the future of electronic payments is now, the credit card reconciliation process has been somewhat left in the past for many businesses.
What is the issue with credit card reconciliation today?
The issue with the credit card reconciliation process is that many businesses do not have the capacity to keep up with an increase in sales or credit card transactions. Even the simplest travel and expense actions can become complex when using old methodology and practices. Often, these businesses that are struggling are still using an outdated and time-consuming manual system, making it difficult to maintain integrity, accuracy, and accountability with their credit card transactions.
Why is reconciliation important for credit card transactions?
Reconciliation ensures the integrity, accuracy, and accountability of your business:
- Integrity: Reconciling your credit card verifies the integrity of data between credit card transactions and your business’ internal financial records.
- Accuracy: Ensures that your ending balance matches your actual bank account.
- Accountability: Increases your likelihood to catch errors and fraud.
As a result of this inability to maintain integrity, accuracy, and accountability with credit card reconciliation, we’ve come up with 5 steps every business can take to improve their current process.
1. Identify the issue
There are many steps within the credit card reconciliation process. Which means that there are also many errors that can occur throughout the process. Furthermore, there are many different methods for reconciling credit cards. This is distinctive for each business and situation.
What are the issues that arise during a credit card reconciliation process?
Think of situations such as the following:
- Are you noticing an imbalance in your accounts?
- Are you struggling to juggle multiple data formats, cutoff times, and information points?
- Are you using an outdated manual system that is now inefficient due to an increase in card holders?
- As a result of the manual system, are you finding it time-consuming to sift through a large number of transactions?
- Are you having difficulty closing out month end?
- Are you unable to identify transactions that are not within policy?
- Are you having to recharge line items to account codes manually?
Identifying the specific issues you’re facing will help you take steps in the right direction towards improving your credit card reconciliation processes.
2. Forget your manual process
A lot of businesses, especially those reconciling their credit cards using a manual system, are resistant to change. By forgetting the “this is always how we’ve done things” mentality, you open up a world of new possibilities for your business.
As a result of the change to your credit card reconciliation process, you will benefit by creating greater efficiencies, reducing time spent for cardholders and on accounting, overall improving the ease of your work environment.
3. Standardize your reconciliation process
No matter what you’ve identified as an issue for your credit card reconciliation process, the key to successful change is standardisation and centralisation. Doing so ensures the removal of unnecessary time and money being spent on inefficient processes as well as unnecessary errors.
Integrating an automation software will help to standardize and streamline your credit card reconciliation process.
4. Integrate with your accounting software
Once you’ve identified the issue, you can integrate the latest automation technology. Doing so will help on all fronts of the reconciliation process, increasing your transaction capacity, and improving the efficiency of accounting.
There are many credit card reconciliation providers to choose from. By answering the previous questions, you will be able to choose an automation software that’s right for your needs.
5. Adapt to an automated expense process
Moving to a new digital platform or process can seem like a daunting task but it’s actually quite an easy transition. Not only does automation benefit the accounts team but also brings convenience to the cardholder by providing the ability directly to their mobile phone. It is, however, a good idea to have a plan of action to make sure the necessary changes are determined, to help you, your employees, and your business adapt smoothly to your new credit card reconciliation process.
For example, try:
- Acknowledging the change with a sit-down meeting. Bring up the reason for the change and how you are going to move forward with it.
- Make it easy for your employees to adapt by creating a step-by-step guide or a demonstration.
- Create a grace period that gives your employees time to adapt to the changes.
- Encourage collaboration and communication.
Every minute and dollar spent on your credit card reconciliation process matters, especially when interest payments are involved. Updating the outdated manual system to the latest automation technology will improve the efficiency and ease at which your business operates.