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Tips to relieve the headache of credit card reconciliation

“I understand your pain.”

That’s how Vicki Richardson began her presentation at the Sage Transform conference 2022 in Orlando. She spoke about how to soothe the “trauma” of reconciling the many transactions made on company credit cards carried by employees.

Richardson, manager at Baker Tilly Digital, spent more than a decade as the chief financial officer of a large not-for-profit in California, where she kept track of the use of one corporate credit card by more than 100 employees.

At the conference, Richardson demonstrated reconciliation and payment tricks using Sage Intacct accounting software.

Proper preparation is key to success

To avoid the familiar dilemma of “garbage in, garbage out,” Richardson said, proper setup is key. As a first step, create one liability account in the general ledger for each brand of credit card – Amex, Mastercard, Discover, VISA – that employees use.

All those transactions remain in the appropriate general ledger liability accounts until the user creates a charge payoff. Richardson likened the liability accounts to “buckets” that hold the credit card transactions. They appear on the balance sheet in the credit card liability account, not in accounts payable. Richardson noted that once the user associates a general ledger liability account with the appropriate credit card, the field “greys out” and cannot change.

Next, create a vendor listing in accounts payable, with one entry for each type of credit card, and associate the vendor listing with the credit card, Richardson said.

Now it’s time to upload the credit card transactions into Sage Intacct, using one of these three techniques:

  1. Through the user interface, a completely manual exercise that Richardson discourages;
  2. Through a bank feed with auto-matching, a process Richardson recommends;
  3. Through a third-party vendor

Once the credit card transactions are in the system, and with the credit card statement in hand, it’s time to “grab the bull by the horns,” and reconcile, Richardson said, though she reminded her audience that reconciling the charges and paying the bill are distinctly separate activities.

“Reconciling your credit card statement does not create a charge payoff or create a bill in accounts payable,” she reiterated, citing one of the most common mistakes users make.

Richardson promised that creating a charge payoff is “a breeze” if the previous steps were correctly executed. Do not create a journal entry under “more actions,” she said. Instead, “make your entries through the credit card application, so the entries will display correctly later.”

Creating a charge payoff is “a breeze”

On the charge payoffs screen, select the plus sign. Fill in the name of the credit card that was used and the date of the charges of interest. Select post. Creating the charge payoff moves the funds from the Credit Card liability account and into Account Payable by creating a bill under the Vendor tagged in the Credit Card setup. Then, pay the bill in the usual manner from the “pay bill” screen in accounts payable.

One last tip: if you have a large monthly bill and want to make a mid-month payment, do not use the advance functionality feature found in accounts payable, Richardson advised. This will create issues when reconciling your statements. A workaround for this is to create a negative credit card transaction using a clearing account as the “expense”. The system will allow you to choose a bank account, but this will not show up when reconciling your bank account. You will then have to create a JE to move the funds from the clearing account to your bank account.

Richardson said she hopes users remember two key pointers from the presentation:

  1. Reconciling the credit card does not create a bill in accounts payable. Only the charge payoff function does that.
  2. The credit card account behaves like a sub-ledger. The transactions need to be created in the sub-ledger for the user to reconcile.

Whether you work at a large or small company, staying organized while reconciling your credit card is key. Contact us to learn more about how Baker Tilly Digital can help you relieve the headaches of credit card reconciliation.

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