Employee credit cards can also be used to benefit small businesses. Employees can use them to pay for business expenses related to travel or operation. When an employee goes out of town for training or meetings, he can use his card and submit expense claims after. This is where efficient credit card expense accounting comes in. You can use credit cards anytime but you should always keep track of how you use it.
Credit card transactions are quite different from those paid in cash or automatic debit. For one, credit card purchases can be easily tracked. You’ll have a statement of account at the end of each billing period and you’d be given around 20 days to pay the entire amount due. That is if you’re using a corporate credit card.
For personal ones used by employees for reimbursement, the employee would need the transaction receipt and confirmation email that details the purchase or payment made. So, when everything else is provided electronically, why do you still need credit card expense accounting?
Credit card expense accounting can be complicated if you need to manually enter the information as a journal entry. The accounting staff will identify every purchase made, log it onto the general ledger and verify all the information as accounts payable to be accurate and true.
The problem arises when you integrate the information manually into your accounting system. No matter how detailed credit card statements are, they can still be prone to errors and fraud if these are manually entered and verified.
Credit card expense accounting and reconciliation is the process of comparing the details of your bookkeeping records and the details shown in the credit card statement. The process of matching each information including price, location, merchant details, and quantity can be tedious and time-consuming. If the information doesn’t match, the accounting staff repeats the entire process to come up with a reliable balance sheet. If they perfectly jive with no discrepancy, then the general ledger can be closed, and financial statements will be readily available before the accounting period.
Small businesses should realize by now how accounting automation can help improve accrual expense tracking processes. Automated credit card reconciliation will save the business from credit card fees and penalties. Interest charges on unpaid balances can increase the company’s debt and can also make a negative impact on its credit score. Aside from this, automated reconciliation can also:
Once purchase receipts are uploaded in an automated accounting system, the details are automatically captured and integrated into the system. Without waiting for 30 days for credit card companies to generate the bank statements, companies can record credit card spending in real-time. Once a non-allowable expense is entered in the general ledger account, the manager can notify the employee so no more credit card purchases of this type will be made moving forward.
Credit card expense accounting allows every member of the team to access the accounting dashboard and see if the data entry is accurate. If some mistakes or errors are evident, the staff can immediately assess, match and rectify them. Automation hastens the process of verification and correction of balance sheets, thus, allowing for the timely generation of accurate asset accounts reports.
Your company’s accounting team doesn’t need to look over tons of papers and physical documents to acquire expense information and complete the chart of accounts. You don’t need to provide a huge space with a lot of steel cabinets to secure the data about credit card sales. An accounting platform in the cloud can secure and store data entry which can help you save space when reconciling income statements, accounts receivables, accounts payables, and credit card transactions.
Employee productivity and confidence are somehow affected when expense reimbursements to the bank accounts are delayed and erroneous. Employee productivity is achieved if employees are paid on time and manual processes no longer take too much effort and time because of automation.
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Reconciling through credit card expense accounting can help confirm the actual money that leaves the account is the same as the amount of money spent. Reconciling is so important that businesses should look for ways to make it an easy process for everyone.
Whether your employees use a corporate or personal credit card, your accounting team should be able to get all the transactions made with it. You can upload credit card statements using expense management software or you can import transactions through integrations. Either way, you need to generate all information in real-time accurately by eliminating manual procedures.
Credit card expense accounting does not end with generating all transactions. You also need to know who made the transaction. Was the person authorized to pay something with the card, in the first place? To resolve the issue, business owners should allot a budget early on. For instance, you should have assigned specific funds for every staff or team – travel budget for the sales team, advertising budget for the marketing team, and fuel costs for logistics.
Receipts, invoices, airline tickets, boarding passes, and car mileage tracking are just a few of the documents you should collect to support the transactions. The IRAS recommends that you should keep data and business records for the last five years to support tax claims and verify the accuracy of expense reports.
All information contained in the credit card statement, purchase receipts, and ledger should match. Otherwise, you need to identify where the discrepancies occur and ask the employee for resubmission of claims. With an automated reconciliation, everyone from the team can immediately and automatically match, verify and rectify data with one look at an easily accessible dashboard.
Credit cards and corporate virtual cards let you assign a budget, customize spending limits and determine exactly what the budget is for. Virtual cards won’t let you rely on the bank’s funds. Corporate cards are preloaded by the company, which prevents fraudulent transactions and easy tracking. Virtual cards also make sure the transaction is related to the business so, overspending is not a question at all.
Credit cards and corporate cards are financial tools businesses can use to manage their finances, track spending and keep the company thriving against fraud. Whichever you prefer to manage the company budget, automating the tracking and management of these transactions can reduce errors, prevent discrepancies and resolve reimbursements on time.