How Automatic Reconciliation Improves Finance Efficiency
Can automation improve the credit card reconciliation process?
The credit card reconciliation process has been long overdue for improvements. Time is wasted when finance teams need to reconcile card spend manually. Automated reconciliation is the key to a more efficient process, discusses Bar Winkler, general manager at Tipalti.
Corporate credit cards might seem like things of the past, but they just look different now. No longer are they reserved for only the leadership team, leaving all other employees to make purchases out of their own pockets and then wait for reimbursements later. Instead, organizations choose their preferred methods for using cards, such as assigning cards per employee, department, project, vendor, and more. Part of this is due to the nature of purchasing, with a growing number of company transactions occurring online. However, this does pose a problem for finance departments.
What Are the Issues Plaguing Shared Corporate Credit cards?
Shared cards often require a great deal of back-and-forth from the finance team, including trying to track down who made which purchase and why – all before trying to determine whether a payment is, in fact, correct and authorized. Should the transaction take place offline, there’s always the risk of a physical receipt getting lost or misplaced. It’s not like employees are in a rush to immediately submit receipts to finance on the date of purchase either. Instead, most employees sock them away in their wallets or desk drawers for a month or two until they are reminded to submit receipts. The whole thing can quickly become a big mess, as it’s challenging to go through the credit card reconciliation process for transactions made in the distant past.
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For starters, it puts your company at greater risk of fraud or misuse. If a past transaction is labeled as fraudulent or not approved, given the age of purchase, you can miss out on any grace periods or time frames to contest the transaction and file a chargeback. Additionally, if transactions aren’t reconciled promptly, bad behavior can go unchecked, leaving those cards to stack up more and more problematic transactions. Your finance team is also working off various sources of data—not the best process, as there are more places to search out and solve potential discrepancies.
Even something as straightforward as a monthly software subscription can become problematic. The team first receives an invoice from the provider, then a receipt, and finally a credit card statement. If something were to be off or go missing, a great deal of time and energy would need to be spent on a single transaction of the credit card reconciliation process. Multiply that by the number of transactions your company does in a month, and it’s hard not to see your process’s inefficiencies.
Complicating matters further are the statements themselves. Rarely, if ever, will they coincide with the monthly closing of your books; they might contain transactions from a few weeks or even several months prior, depending on when transactions actually go through. This alone often pushes the credit card reconciliation process back. Credit card statements generally arrive after the end of the month. Besides, finance systems can become siloed from themselves over time, with credit card spending managed separately from invoices and other payments. It all adds up to a lack of control and visibility, raising even more questions involving your operations’ finances.
Questioning the Financial Numbers of Operations
Though manual processes certainly can get the job done, they’re incredibly time-intensive when it comes to an organization’s finance function—even more so when dealing with company credit cards. As already mentioned, cards lack the controls and approvals necessary to minimize the chances of fraudulent transactions. They also lack the flexibility to adjust spend or usage limits for individual employees and pre-approved vendors, suppliers, and providers. Anyone who knows the details can buy almost anything they want up to the credit card limit.
Additionally, the credit card reconciliation process—or any payment reconciliation process, for that matter—requires a lot of documentation to ensure the books are in good shape. Bank statements, credit card statements, invoices, receipts, purchase orders, credit memos, and so on are all used to verify the numbers. Handling all this information manually increases the chances of human error. A single misplaced number or decimal point could lead to incorrect expense reporting, throwing off your operating profit margins.
Automating Credit Card Reconciliation
Automating the credit card reconciliation process is a key part of a much bigger technology play and serves as a solid foundation to better manage employee expenses. In fact, it can help streamline many internal processes, improving the overall efficiency and productivity of finance teams and functions.
According to one survey, of all the benefits automation offers, time-savings topped the list with 44% of employees. Beyond saving time and speeding up the closing process, the following are a few of the other accounts payable automation benefits:
1. Increased financial controls
Depending on your choice of technology provider, your finance team can enable functionality to limit usage by employees, vendors, and purchase categories. Such control reduces business risk and minimizes fraudulent transactions. At the same time, the automation platform can associate every transaction by payee and employee in real-time.
2. Improved visibility
Because your team is working through a single platform, it’s possible to offer a centralized view of spend. All purchase data, from virtual cards to wire transfers, is stored in one location, giving the finance team real-time visibility into your organization’s financial figures.
3. Automatic reconciliation
Automatic reconciliation is just as it sounds: technology designed to automate credit card reconciliation, thereby eliminating the need for spreadsheets to reconcile credit card charges manually or go through the back-and-forth process of tracking down missing receipts. Each transaction is immediately captured, processed, and stored in the system alongside all other payment methods. Automatic reconciliation eliminates the complexities often associated with traditional card programs and manual processes.
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4. Simplified workflows
Automation technology allows finance teams to set up, easily monitor, and manage card spend across the entire organization. Anyone on the team can pull up end-to-end information on any payment or transaction in just a few clicks.
Rethinking the use and management of company credit cards has been long overdue. Much like many of the other processes in the finance function, it’s become antiquated. With the ever-evolving role of finance, leaving teams to do manual tasks that can be easily automated provides little time for them to focus on value-added activities. Just this small thing can make all the difference in improving the efficiency and productivity of your finance team.
Are you ready to move to automated reconciliation for your corporate credit card? Share your thoughts with us on Facebook, Twitter, and LinkedIn. We’d love to know!
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