How to reconcile business credit card transactions

From a $20 software subscription to a $900 business trip, credit card expenses can add up to dozens of transactions each month. Each one needs to be accurately reflected in your books, but what appears on your credit card statement doesn’t always match what’s recorded in your accounting system.

Regular reconciliation helps you catch errors, remove duplicate entries, spot potentially fraudulent charges, and keep your financial records accurate. The process takes time, but a consistent routine makes it much easier to stay on top of your expenses.

This guide will walk you through each step of the reconciliation process. We’ll also cover common variables that can complicate reconciliation, including multiple employee cards, missing receipts, and refunds, as well as how to handle discrepancies when they arise.

By the end, you’ll have a simple, repeatable process for reconciling your business credit card transactions and keeping your expense records complete and up to date.

Reconciling credit card transactions involves comparing the transactions that have been reported by your credit card issuer with the transactions in your accounting records to make sure the two align. When they don’t, you investigate the difference and correct any errors.

During this process, you’ll review purchases, payments, refunds, credits, interest, and fees to make sure each transaction is accurately reflected in your books during the reconciliation process. When something doesn’t line up, you may need to dig into the transaction details — such as who made the purchase, what it was for, or whether there’s a receipt or other supporting documentation — to identify and resolve the discrepancy.

Regularly reconciling business credit cards comes with a number of benefits, including the following:

Accurate expense records

Credit card reconciliation helps make sure that all of your team’s purchases are correctly recorded and accounted for in your books. This makes month-end closing easier, can improve expense categorization by helping you catch coding errors, and gives you a clear picture of company spending.

Fewer discrepancies

You can more easily catch missing or duplicate transactions and identify incorrect or out-of-policy charges before they become a major problem for your business. Reconciling your transactions also enables you to collect missing supporting documentation, such as receipts or invoices.

Better visibility into spending

Regular reconciliation gives you a more current, reliable view of credit card spending. That can make it easier to spot unexpected expenses or departments that are trending over budget before those costs snowball.

Strong financial reporting

Accurately reconciled credit card accounts contribute to more reliable financial statements and reports, which you can use to make strategic decisions for the future of the business.

Having the right records on hand can make business credit card reconciliation faster and easier. Before you get started, gather the following:

• Credit card statement(s) for the period you’re reconciling
• Accounting records that show the credit card transactions and account balance for the same period
• Supporting records you may need to investigate individual transactions, such as receipts, invoices, and payment or refund records

If this isn’t your first reconciliation, it can also help to have the previous one on hand to confirm your starting point and check for any unresolved items.

To reconcile your business credit card, you’ll match the activity on your statement against your books and investigate any differences along the way. Follow the steps below:

Step 1: Choose the statement period you’re reconciling

Determine the credit card statement period you want to reconcile. Most credit cards have a monthly billing cycle, which is a good frequency for reconciliation.

Make sure to use the exact same start and end dates for the accounting records you’re going to reconcile the credit card statement with.

If you’ve reconciled your business credit cards before, start from the first day after your last reconciliation period ended.

Step 2: Compare your credit card statement with your accounting records

This is where the detailed work begins. Compare the ending balance on your credit card statement with the balance recorded for that credit card account in your books.

If the two numbers are the same, your accounts are probably in good shape. However, you’ll still want to review the underlying transactions to confirm everything has been recorded correctly.

If the two numbers don’t match, note the difference between the balances. This doesn’t mean that something is wrong. Often, the discrepancy can be explained by normal timing differences, such as a payment or refund that’s been recorded in your books but hasn’t yet posted to your credit card account.

Step 3: Match individual card transactions

Review all the activity for the reconciliation period, including purchases, payments, fees, refunds, and other transactions. Match each transaction on the credit card statement with its corresponding entry in your accounting records. Look at merchant, amount, transaction date, posting date, cardholder name, and other details.

Mark all transactions that match. Flag any transactions or entries that only appear in one set of records.

Step 4: Investigate and resolve discrepancies

For any transactions you flagged in the previous step, investigate the difference to determine what happened. Look for common problems like incorrect amounts, duplicate or missing entries, payments that haven’t been recorded correctly, and missing refunds or credits. Use the receipts, invoices, expense reports, payment confirmations, and other documentation to help you figure out the problem.

Pay particular attention to:

• Payments: If any payments have been made to the credit card balance, ensure they have been recorded correctly in your books. (Remember that paying your credit card bill generally reduces the credit card liability; it isn't a new business expense).
• Refunds and credits: Match refunds and merchant credits to the original purchases and confirm they're reflected in the appropriate accounts.
• Fees and interest: For credit card fees or interest charges, make sure they have been entered into your books. If not, enter them in.
• Other adjustments: Review the credit card statement for any other adjustments so that they are properly reflected in your accounting records.

Clean up any bookkeeping errors that are causing a discrepancy, but make sure not to change legitimate entries to force the balances to match.

In some cases, an unexplained charge may be unauthorized or fraudulent. If you can’t verify a transaction after reviewing your records and checking with the cardholder, flag it right away. The appropriate person on your team can then contact the card issuer to address the issue.

Step 5: Review your records and complete the reconciliation

Before you wrap up, use the opportunity to make sure your expense records are complete. Check that required receipts or invoices are available and, where applicable, confirm the business purpose and cardholder associated with each purchase. You can also check that purchases are assigned to the correct expense or general ledger accounts and correct any categorization errors you find.

Then, compare the balances again after making any necessary corrections. Account for any legitimate timing differences, such as a purchase made near the end of the statement period that was recorded in your books but didn’t post to the card account until the next period. Once you’ve accounted for those differences and corrected any errors, the reconciled balances should agree.

Document the completed reconciliation and make note of any outstanding items that you’ll need to check during the next period.

Startups may only have one business credit card. However, if your company is on a growth track, you may also have employees with their own corporate cards. While you will need to follow the same business credit card reconciliation process as above, the main difference with employee credit cards is the need to track which cardholder made each purchase and collect the supporting information for it.

In this case, you’ll need to collect supporting information from employees, connect each transaction to the correct cardholder, and confirm the business purpose of the purchase. You’ll also need to follow up with the specific employee if any information is missing or questionable.

Reconciliation discrepancies aren't always a cause for concern. They can often be traced back to common bookkeeping errors or timing differences, including:

• Missing or duplicate transactions: It’s possible that a transaction is not tracked in your books or is accidentally recorded twice.
• Unrecorded items: Annual fees, foreign transaction fees, and interest are items that you may forget to record in the books.
• Timing differences: If you make a transaction toward the end of a statement period, it may appear in your books but not on your credit card statement.
• Incorrect transaction details: Amounts may be recorded incorrectly in the books or transactions may be recorded against the wrong credit card account.

A good baseline is to reconcile your business credit cards monthly, ideally when your credit card statement becomes available. Keep in mind that this may not be on the first or last of the month, but mid-month in some cases. Businesses with high transaction volumes may choose to reconcile more frequently, such as every week.

Regular credit card reconciliation also supports a smoother month-end close by helping keep card activity and balances up to date.

Regardless of how often you reconcile business credit cards, be sure to collect supporting documentation as transactions happen. That way, you aren’t tracking down receipts or other details weeks later when it’s time to reconcile.

Business credit card reconciliation is an important process that requires time and consistency. When done regularly, it helps ensure your startup has accurate information about its expenses and credit card liabilities, leading to strong financial records.

However, you don’t have to do the process manually. Using software to reconcile corporate card transactions automatically is a great way to save time, increase efficiency, and improve accuracy. Mercury Books enables bank-connected bookkeeping, so you can automatically categorize transactions, apply GL codes, match receipts, and so much more.

Explore Mercury today, and see how you can spend less time on credit card reconciliation and more time on building your business.