What is credit card reconciliation?

Types of credit card reconciliation

Credit card reconciliation can take several forms depending on the source of the transactions being reviewed. At its core, the process revolves around validating that all expenses are legitimate, correctly categorised, and matched with supporting documentation.

Below are the two primary types of credit card reconciliation:

1. Credit card statement reconciliation

This is the most common form and focuses on aligning the transactions from the credit card provider’s monthly statements with the entries in the company's accounting system.

Key steps include:

• Gathering statements: Collecting monthly statements for all corporate credit cards in use.
• Recording transactions: Ensuring every transaction is properly entered into the internal finance system.
• Matching entries: Verifying that each line item on the credit card statement corresponds with a transaction recorded in the books.
• Investigating discrepancies: Identifying and resolving mismatches, such as missing receipts, duplicate entries, or personal spend errors.

This type of reconciliation helps ensure that all card-based expenditures are legitimate, accurately coded, and supported by documentation such as receipts or expense claims.

2. Credit card merchant service reconciliation

This applies when a business accepts card payments through a payment processor or point-of-sale (POS) system. Here, the goal is to confirm that the sales data matches the funds actually deposited into the business account by the card processor.

Key steps include:

• Recording daily sales: Logging all transactions processed through the POS or merchant system.
• Matching deposits: Verifying that the amount received from the merchant services matches recorded sales.
• Verifying fees: Ensuring the transaction fees deducted by the card processor are correctly accounted for.
• Resolving timing differences: Addressing any delays between sales and actual deposits, often caused by processing lags or batching.

This type of reconciliation ensures revenue is properly accounted for and highlights any potential issues with payment processing or merchant service fees.

Why is credit card reconciliation important?

While it may seem administrative in nature, credit card reconciliation plays a vital role in the financial health and integrity of an organisation. Below are the key reasons why this process should never be overlooked:

1. Accuracy of financial records

Reconciliation ensures that all credit card transactions are properly reflected in the general ledger. This accuracy is critical for producing trustworthy financial reports, making data-driven business decisions, and maintaining confidence with stakeholders and auditors.

2. Fraud detection and prevention

Regular reconciliation helps identify unauthorised or suspicious transactions early. This might include unexpected international charges, duplicate expenses, or card misuse. Timely detection enables prompt investigation and mitigation of potential fraud.

3. Improved cash flow management

Understanding exactly what has been spent — and when — gives businesses greater control over their cash flow. Reconciliation reveals real-time visibility into expenses and can prevent overspending or unplanned liabilities.

4. Regulatory compliance

Accurate financial records are essential for complying with accounting standards such as IFRS and GAAP, as well as with internal control frameworks. Regular reconciliation helps companies avoid non-compliance penalties and ensures audit readiness.

5. Error identification and correction

Mistakes happen, whether it's a transaction recorded twice, an incorrect amount, or a missed entry. Reconciliation brings these errors to light, allowing finance teams to correct them before they impact financial reporting or budgeting decisions.