Credit card reconciliation for a small business

A bank account has one transaction per payment. A credit card has two: the charge when you buy, and the payment when you settle the balance later, often in a different month. Record both as expenses and you have doubled your costs.

Cards also collect the least documented spending in the business: subscriptions nobody remembers, travel, small tools, and the owner's personal purchases made by accident. Each one needs a decision, not just a category.

• The card payment is a transfer, not an expense: it reduces the liability, nothing more.
• Interest and annual fees are expenses in their own right, not part of what you bought.
• Refunds and chargebacks have to land against the original expense, or the category stays overstated.
• Personal spending belongs in owner's draw, not in an expense account.
• Rewards and cashback are usually income or a reduction of expense, and they still need recording.

The routine is the same every month, and it is short once the account is clean.

• Enter the statement ending balance and date from the card issuer's statement.
• Match every charge, refund and fee in the books against the statement.
• Confirm the payment from the bank is recorded as a transfer to the card, not as an expense.
• Chase receipts for anything above your documentation threshold while people still remember it.
• Finish at a zero difference, then keep the reconciliation report.

Nearly every unbalanced card comes from the same handful of causes: the payment recorded twice, a charge entered by hand and again from the feed, a refund recorded as income, a statement period that does not match the reconciliation dates, or a past reconciliation that was forced through and now carries a wrong opening balance.

A card that has never been reconciled is cleanup work rather than monthly work, because each month has to be rebuilt in order. Cleanup starts at $250, and the final price depends on how far behind the books are.

One card with twenty charges a month is a twenty-minute job you can do yourself. Three cards with a hundred charges, several users and receipts scattered across inboxes is where owners quietly stop doing it, and that is where the books start drifting from reality.

Best for a business with more than one card and nobody chasing receipts: SF Business Solutions reconciles every card as part of monthly bookkeeping, from $250 a month, in your own QuickBooks Online or Xero file, and prepares and files the tax return from those books. Card reconciliation is not sold as a separate service, because a card that is reconciled while the rest of the books are not proves very little.