Spend management 9 min read

Payment reconciliation: how to reconcile credit card payments 10x faster

Alfie Marsh

Why do finance professionals get into this line of work? 

Take me: I studied accounting and finance. I did so because I want to take that information and make business decisions. I want to power and drive companies with better financial data. 

I certainly don't want to have to manually reconcile credit cards

We don't want to be sitting there doing these kinds of low value added tasks that just take time. So the fact that every credit card takes hours and hours to reconcile at the end of the month isn't fun.

And yet, finance teams spend days each month reconciling cards to get their books in order. It’s important work, but it shouldn’t take this long. 

It’s not their fault, of course. As I’ll explain, the system just wasn’t designed with finance teams in mind. At least not the “status quo” system. 

As the title suggests, we’re going to see a far more efficient way of reconciling payments. It’s also more secure, and frees up the entire company. 

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But first, we have to talk about the situation today.

Why do companies rely on credit cards?

The need to reconcile payments comes from a simple truth: every company in the world needs to spend many. And they have various ways to do this:

  • Invoices: paying a recruiter $10,000 in one lump sum, for example
  • Out of pocket: for employees who don’t have access to company cards
  • Direct debits: for large subscriptions or one-off payments (tax bills, perhaps)
  • Credit cards: day-to-day spending, travel, software subscriptions, advertising, and plenty more

Credit cards are one of the most popular ways to handle company spend. Most of us use them in our personal lives, so using them at work is somewhat natural. 

Plus businesses don’t have to make a bank run for every little payment - teams can just pay and carry on. They seem pretty efficient, so companies keep using them.

And the banks want it that way. Their business model is to maximize credit card payments so they can make money off interchange (the fee charged for credit payments).

That’s what they’re focused on - not whether finance teams can reconcile payments easily and close the books. Which leads to our next point.

Issues for the finance team

Credit cards aren't really built for finance teams, or the operations and processes that finance teams need to put in place. Finance people have certain outcomes they need to achieve: 

  • Close the books at month end
  • Reconcile those credit cards 
  • Categorize payments with general ledger codes 
  • Capture receipts
  • Report back to management and the board.

Ultimately most of those payment methods above - and especially credit cards - make all of this more challenging. Finance teams have to build backend processes which take a long time and are very manual. 

The cards themselves are completely separate from the processes that a finance person needs to do.

Here are a few of the biggest issues.

1. Closing the books

Let’s start with the biggest one. As I wrote in the introduction, every credit card adds hours of reconciliation at the end of the month. It’s not overly complex work, but it’s important and needs to be done. 

This comes from the fact that the cards themselves aren’t connected to your other finance tools. You can’t just look in Netsuite or Xero and see every credit card transaction and why it was made. You have to connect the dots yourself to have up-to-date books. 

Which might seem like just a natural part of doing business. But the whole premise of this article is reconciling payments 10x faster, so trust me, it doesn’t need to be. 

2. Maintaining control over company cash

When you have a credit card with no built-in controls, you have a problem because employees are responsible for spending the company's money. Even if you trust your teams, it’s obviously not wise to give them unlimited access to funds. 

So to take back some control, companies only hand out cards to a select few people. They give one credit card to each department head. And then, of course, that card gets shared out every time a payment needs to happen. 

This is a big problem, because the finance team doesn't know who that end user making the payment is. The department head is ultimately responsible, but they may not actually have the full story themselves. 

Which makes reconciling these payments at the end of month - and associating costs to the right cost center - very difficult.

3. Managing multiple touch points

Another key issue is the number of people involved in each transaction. Even if the payment itself can be straightforward, there’s a flow-on effect that leads to lots of admin. Each payment involves: 

  • The payer, often a frontline employee who needs a tool, a piece of stationery, or to book a flight;
  • Their manager, who should really be the payer (in theory). They need to approve and review every purchase;
  • A finance team member (often the financial controller), who needs to oversee all payments made by the various business units;
  • The accountant, who may be part of the finance team or could be outsourced completely. They need to reconcile payments and close the books each month.

So when information is missing from the payer or their manager, it stalls the whole process. And those people aren’t finance professionals - they likely have no idea why any of this matters. 

Ideally, you’ll make their part as smooth and simple as possible. More on this shortly. 

4. New rules around security

New 3D-S and PSD2 rules can also make shared credit cards a pain. These are extra security added by card providers (as required by law in most countries).

You know the drill: you make a payment, receive an SMS, and then enter the code sent to you by SMS to complete the transaction. It works well for personal cards, because these are never shared. 

But when you share a credit card, the SMS is always sent to the same number no matter who pays. At best, you’re in the same office and can quickly share the code. (Not particularly secure, but it works). Other times, you simply can’t make the payment. 

5. Operational bottlenecks

When the company is small, you might have one card held by the finance person or office manager. As you grow a little, that might become five cards held by department heads. 

Either way, when the company grows even further, these cards become serious bottlenecks. If employees have to come to the finance department every time they want to pay, they’ll either find ways to avoid this process or stop doing their best work altogether

It's also not good for the person that is the bottleneck. It’s a stressful position to be in. You've got to approve these payments yourself, making decisions in areas that aren’t actually your speciality. So when you grow, you need to be able to delegate.

We think the challenges with using and reconciling company cards are pretty clear. So how can you make this process 10x faster?

How card payments should work

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Smart businesses always start with their goals. And the goals for the finance team are pretty clear regarding payments. You want to:

  • Control spend before it happens
  • Know exactly what that's been spent on in real time, not a month plus a couple of weeks after the month-end close. 
  • Be able to bookkeep payments with all of their receipts, without having to do lots of manual work. 

So let’s start with those end goals and work backwards. It’s pretty clear that a pure focus on payment methods (credit cards and direct debits, for example) doesn’t help you achieve them. 

You actually need a quality finance platform first, with those payment methods built in. When you have both working in tandem, there’s a simple, clean workflow. 

The easiest way to picture it is to think of a single platform with logins for every user. You take a Spendesk account and invite all your employees onto that. You can put them into teams, set up their rules and spend policies, and then they'll have access to payment methods.

Those payment methods can certainly include physical cards. Every employee who needs one can safely have a corporate card, thanks to the spend policies and rules built in.

And with so much online spending these days, they’re just as likely to use virtual cards created from within the platform itself. You can have an unlimited number of virtual cards - which let you separate every one-off or recurring payment - while still restricting the volume of total spend per user. 

How this makes payment reconciliation 10x faster

Here’s where we bring it all together. To recap, reconciliation is a pain because corporate cards offer little visibility, there’s no clear payment history, and you’re always missing receipts

But a spend management system like Spendesk is built specifically to tackle these issues. First, every transaction has its own history, automatically generated and viewable in one place. 

At a glance, you see who made the payment, where, why, who approved it, and whether the receipt is attached. And you can spot issues immediately:

 

Next, all of this happens in real time. If I take a corporate card to Starbucks, I know what happened, but the finance team won’t until I provide some kind of report. But with the card connected to a platform, you have all the backend information the moment the purchase occurs. You’ll see that Alfie made the payment (because it’s my card), at Starbucks, for X amount, to have coffee with a client (I provide a reason via the mobile app).

The platform even applies the correct GL code right away, based on the circumstances and who made the payment. 

You will never see this information on your corporate card statement. They weren’t designed this way. But Spendesk cards were. And it works the same way for virtual cards, invoice payments, and even employee expense reimbursements. 

So this is where the idea of 10x faster card reconciliation comes from. It’s faster because it happens in real time.

The other timesaver comes from the fact that this is all digital by default, so there’s never any data entry. The finance team has all the information it needs, and you can export payments directly from the spend management platform to your accounting tool. (Which also speeds things up for external accountants.)

Small example: LinkedIn spend

We’re a B2B company, so we have a lot of interactions on LinkedIn, and many of us have LinkedIn Premium accounts. In the early days, users would create their own accounts if and when they needed them - a classic bottom-up approach. 

In time, we realized that we had 15 or so individual accounts, all paid through our Spendesk cards. And it made more financial sense to upgrade to an Enterprise account for the whole company. 

We only discovered this because all our payments are linked to individual users, and are all visible in the platform.

If we had those 15 LinkedIn premium accounts on a few company credit cards, we wouldn't know who owned those LinkedIn premium accounts. We might not even know that we had 15! We’d just see regular lump sums going to LinkedIn and would know it was for the Sales or Marketing team, but not how those lump sums were made up. 

In this small example, we saved 30-40% per month by upgrading the account. And you could have the same thing on Facebook or Google, with regular ad campaigns running. You’d see the amounts going out, but have no real idea of what each campaign is for or whether those amounts were spent wisely. 

And crucially, you can easily connect what you’re spending with the campaign goals and KPIs - without overly complex spreadsheets. 

Spend management benefits

Obviously 10x faster closing is worth celebrating. But there are plenty of extra reasons to make this critical switch.

1. Clearer money tracking

Once you start tracking card spend better, it’s amazing what you discover. You see all those subscriptions that nobody uses yet you’ve been paying for over the last six months to 12 months. You can cancel them immediately. 

You’ll find double-ups all over the company. For finance teams that take cash flow seriously, it’s a lifesaver.

2. Smarter decision making

You can also start to deploy funds more strategically. For example, you may see that every travelling employee stays in the same hotel for work trips. Now that it’s obvious, you can take a corporate account or negotiate better rates with that hotel. 

And you’ll see the same thing with catering companies, restaurants, server providers and software companies. 

3. Easy reporting and forecasting

Once the books are closed, the next step is usually reporting and forecasting spend for the coming quarter or year. By having all payments linked to the correct GL codes right away, this is faster.

In fact, it can even be done before the books are closed, because the information is complete and available in real time. 

4. Empowered employees

Finance teams don’t want to be the bad cops. But to keep control and remain compliant, sometimes that’s the only way. So if you can empower individuals with access to secure, controller payment methods, finance is no longer seen as a roadblock.

Team members can move quickly and do their best work, and finance teams say “no” a lot less often. 

Spend management vs expense management tools

There are some interesting solutions available that act as a sort of layer on top of your credit card. These are essentially budgeting apps, like Mint or Copilot, which you might use at home. They work well in private because there’s a small amount of spending going on, and only one or two cards attached. You’re never confused about who spent the money. 

But in the work context, this still doesn’t address the root cause of the problem: shared credit cards. If you take a regular corporate card and add expense management tools, you do add some value: employees can add a little extra information after the fact. Which is nice. 

But you still have people sharing credit cards, which is risky. And now someone has to manually add information to the expense tool - often the manager in charge of the card. They still have to chase them if there are no receipts at the end of the month, and they still don't know what the payment was for unless everyone is very diligent.

Whereas a spend management platform captures the information and the receipts immediately, with no extra work. No more shared cards, and no more missing information. 

Which makes for very fast reconciliation indeed.

Conclusion

So that’s how you make credit card reconciliation 10x faster with a relatively small change. By the way, that “10x” number isn’t just made up. That’s the average amount of time saved by people using this method, coming from hundreds of calls.

And here are a few more numbers, based on Spendesk client surveys: 

  • The entire month-end close process is now 4x faster. If it took four days, it now only takes one. And in many cases, it’s much faster than that.
  • Spendesk users collect 95% of payment receipts on time, every time. If you’re currently chasing team members all over the office for their documents, forget about it.
  • You also have 100% visibility over all company spend. The initial request, approval, payment, receipt, and cost center allocation are all logged for you to see any time.

All of which sounds (and is) exciting. The only real question is whether this is the right time for you to make the switch. In many cases, it absolutely will be. 

So talk to our team to find out. If Spendesk isn’t a good fit for you, we’ll be the first ones to say so.

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Alfie Marsh

Alfie Marsh is Spendesk's Head of US Sales. He helps growing companies create more efficient and effective spending processes, and move away from the traditional hassles of spending at work.