Credit Card Reconciliation: A Complete Guide to Streamlining Your Financial Processes [+ Automation Tips]

Credit cards are an increasingly intrinsic part of the global economy with more than 5.6 billion in circulation around the world. More and more hospitality and retail businesses are embracing cashless payment options, credit cards in particular, which is why it’s essential to understand the details and requirements of credit card reconciliation.

What Is Credit Card Reconciliation?

Credit card reconciliation is the process of comparing a company’s credit card transactions that are collected and processed against the sales posted in point of sale/property management systems (POS/PMS) systems to ultimately accurately record revenue to the bank account.

Importance of Credit Card Reconciliation

Credit card reconciliation is a standard accounting process that must be completed to balance daily revenue and accurately close the month. Not only does it provide full visibility into your finances, but credit card reconciliation is crucial for compliance, risk management, audit traceability, and fraud detection. Having this detailed, comprehensive view of your finances also enables you to optimize operations.

Step-by-Step Guide to Credit Card Reconciliation

Though the process may vary slightly by business, here are the typical steps of standard credit card reconciliation:

  1. Gather reports and records. This includes everything from your POS/PMS and credit card processors and/or gateways.
  1. Obtain information/reports from your credit card processor(s). Either through automation or manual exports, these reports will detail information about each processed batch of transactions, including the number of transactions and total revenue. It is important to gather information at the check level so that each transaction can be reconciled.
  1. Match transactions. Look at each transaction and ensure the posted credit card transaction matches the charge in the POS or PMS.
  1. Account for credit card fees. Since credit card processors assess fees and commissions, this must be accounted for in the reconciliation process, in addition to exchange rates for foreign currencies. 
  1. Identify and match discrepancies or exceptions. You also need to review pending transactions and include any accruing interest if applicable. When an exception is identified, it is crucial that a corrective posting is made in appropriate source systems to “clear” the exception and accurately record revenue. 
  1. Generate reports to be pushed to the general ledger. Create detailed reports that summarize the reconciled credit card transactions; make sure to include information such as dates, amounts, and descriptions for each of your accounts (operational bank account, cash clearing account, and variance account). Then, transfer the generated reports to the general ledger, which serves as the central repository for all financial transactions.

Challenges in Credit Card Reconciliation

There may be certain difficulties in the credit card reconciliation process, especially for hospitality and retail businesses that process a large amount of both revenue or daily transactions. It can be challenging to match each transaction based on posting time, amount, department, and card type but it is critical to reconcile at the transaction level for accuracy.  

Additional challenges can include mismatched transactions, the use of multiple cards for one payment (split checks), and accounting for interest, foreign exchange, and fees. Accurately reporting charge backs and interchange downgrades is also vital. 

For those companies that still reconcile manually, human error can also factor into the process.

Role of Automation

If you’re a hospitality or retail business that isn’t working with an automated reconciliation solution, now is the time to consider the benefits of switching. Automation can expedite the process, saving hours and enabling your employees to focus on other important tasks.  

The right solution can import, tag, and categorize all transactions while simultaneously allowing for rules-based reconciliation. You can also receive immediate alerts for discrepancies or potential fraud, which enables you to handle these issues in a timely manner instead of having to wait until they are found hours later through manual reconciliation. 

An automated solution is not only essential for audits and compliance, but it can generate organized reports quickly and efficiently.

An automated process and can also save accounting teams hours per day to focus on more value added tasks.

Best Practices

If you want to get the most out of your credit card reconciliation process, keep the following tips in mind: 

  • Reconcile credit card transactions at least once a week. Ideally, you should reconcile daily, but once a week (at minimum) is acceptable. This is especially important when it comes to chargebacks, which refers to a payment that the consumer receives after successfully disputing a credit card charge. Consistent reconciliation enables you to address any chargebacks in a timely manner, catch any errors, or flag instances of potential fraud.  
  • Understand the flow of your data. Where is your data coming from, where is it going, and how is it organized? Are you missing key details? Do you have the right systems in place so that your information is easy to find and accurately categorized? These are all important questions to ask. 
  • Implement an automated solution. The benefits to automation are many — including avoiding human error that often results from manual reconciliation. Can you afford a miscalculation or misplaced data entry that will cost your business thousands of dollars? How much labor is being spent with finance teams buried in spreadsheets versus focusing on improving your operations? 
  • Stay up to date on training and compliance standards. Regardless of your reconciliation process, it’s important to participate in monthly or quarterly training so that you’re informed of potential issues or compliance changes. 
  • Keep information secure and access limited to authorized personnel. This should be standard practice across your entire accounting department. 
  • Maintain documentation. This is an especially important best practice, especially when it comes to maintaining compliance and a comprehensive audit trail. Documentation allows for the verification of transactions and can protect you in the event of a potential legal or financial issue. For any exceptions, it is crucial to have an audit trail of the comments and resolution to simplify audits.

Ready to Elevate Your Credit Card Reconciliation Process?

Evention’s Total Recon – Credit Card Reconciliation solution auto-matches over 99% of transactions and provides visibility down to the day and transaction. Access web-based reports with data at any level and over any date range, and when exceptions occur, Total Recon provides detailed insights right down to the individual check and payment level.

If you’d like to see Total Recon in action, just request a free demo and we’ll reach out to schedule a time to talk. 

Explore how Evention can help you develop service level capabilities through automation.

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