Credit cards have become a necessity in today’s day and age. For most of us, the best alternative to carrying cash is to have a credit card. Whether you are shopping online or traveling the world, your wallet-friendly credit card will always be there when needed. In a report in 2020, the usage of credit cards was up to 77% worldwide. This surge in use means we can dismiss the question of whether credit cards can completely replace currency notes.
But, all of that comes with an itsy-bitsy price. When you are using a credit card for business or personal use, chances are you are not actively keeping track of the transactions you are making. For most of us, this becomes a pain, especially when we receive the bill at the end of the month. You are left startled, questioning whether you spent that much money. Keeping track of your transactions is essential, and more critical is reconciliation with your credit card bills.
What is Credit Card Reconciliation & Why Should You Care?
Anyone who has ever attended a business class would immediately react to the word ‘reconciliation.’ It’s the process of comparing the transactions showing on your credit card bill to that recorded by you in your accounting software, ledger, or mobile app. This is a crucial aspect of managing the cash flow for most businesses since there are always doubled, declined, or delayed transactions. To avoid the 3D’s affecting your cash flow, you have to make sure you have the actual picture at hand actively.
Importance of Credit Card Reconciliation
While credit card reconciliation may seem tedious, it’s of high importance for businesses. Banks, merchants & vendors can often show transactions that were declined from the merchant’s end but charged by the bank and so on. In addition, one cannot negate the possibility of fraud and scams. If you don’t check your credit card regularly and stay up to date with the balance, you wouldn’t know if someone has charged your card without your permission. This type of fraud usually happens when you are buying items online. Scams are a reality of 2021 that no one can deny. To avoid this, it is a must to regularly reconcile your credit card statement with the statement you are maintaining yourself.
Types of Credit Card Reconciliation
Generally, there are two methods of reconciling your credit card statement with the one you have maintained.
Method # 1: Goods Sold:
In simple terms, this is the sales side of your business.
When a customer pays you online with their credit card, that payment is processed through the merchant, acting as a middleman between you and the bank. Often, while the merchant’s transaction clears, it might be declined or delayed at the bank side. You match the merchant’s statement with the bank’s statement and your goods sold report to see any discrepancies.
Method # 2: Expenses Incurred
All the expenses you have incurred and paid through your credit card will show in your credit card statement. However, there might be missing transactions due to delays, or there can be duplicate transactions. You have to match the credit card statement with your expense sheet to see any discrepancies.
How Can You Make the Process Hassle-Free?
While credit card reconciliation is a tedious process, several software and applications can help you get through it with ease. Using accounting software integrated with your eCommerce store, you can quickly get your list of payments received, which you can easily compare with your bank statement. There is other software as well that helps you to make the process of credit card reconciliation easier.
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