Financial accounting is a vital health check and wealth review process for any business. A registered company needs to assess and keep records of the business’s progress and economic condition, and financial accounting is the only way to get a precise picture of how the business is performing. This knowledge is necessary to improve financial productivity and set a course for future survival and health.
Financial accounting can also demonstrate a business's fiscal health to attract investors, build business partnerships, and comply with regulatory bodies and auditors. Let’s look at what financial accounting consists of and why it matters for your business.
Financial accounting records, summarizes, and presents a company's financial activity over a period of time through financial statements. Key reports include:
Financial accounting consists of analyzing and documenting a business's transactions. It’s a process that can reveal a business's financial health by presenting the analysis in the form of financial statements. These statements include an income statement, a balance sheet, a cash flow statement, and a statement of changes in equity. These documents record and display the specifics of a business’s operating performance over a set period of time.
These statements are built from data derived from your business operations. Various methods are available for retrieving the data to feed into your financial accounting, including AI-based receipt data extraction, sales records from online transactions, and business bank statements.
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Accounting is a more general term for all of a business’s financial activity. This includes expenses, payroll, sales, profits, and expenditures in every part of the business.
Financial accounting, on the other hand, is specifically concerned with generating financial statements according to GAAP (Generally Accepted Accounting Principles), which are a set of rules that all U.S. companies are expected to follow.
Financial accounting matters because it can help a business in various crucial ways:
There are two types of financial accounting; cash accounting and accrual accounting.
Cash accounting means transactions are recorded when cash is received. The drawback with this form of accounting is that it doesn’t reveal whether revenue or expenses were generated before the cash was received.
Cash accounting is suitable for small businesses with limited capital and a smaller workforce. It’s not a method that’s sophisticated and granular enough for larger businesses with more complex structures and financial transactions.
Accrual accounting, on the other hand, works on the principles of revenue recognition and matching revenue. It’s the most accurate form of accounting as it digitally records each transaction, with revenue earned but the amount not received being logged in the asset account, expense occurred, and cash not paid being logged in the liabilities account. It’s a far more detailed and accurate form of financial accounting for large-scale enterprises.
Financial accounting follows a rulebook of five core principles that act like a recipe for preparing a company’s financial statements. These principles establish the foundation for all the technical rules accountants follow. Let’s break them down with real-world examples:
Imagine you run a consulting firm. This principle dictates you record revenue when the service is delivered, not when you receive payment. So, if you complete a consulting project in December but your client pays in January, the revenue gets recognized in December’s financial statements.
This principle focuses on recording costs at their original purchase price. For instance, if you buy a new office printer for $500, that’s the cost you record, not what you think it might be worth in a few years. However, for assets like buildings or equipment that wear down over time (depreciate), the cost is spread out over their useful life.
This principle ensures expenses are recorded in the same period as the revenue they helped generate. Let’s say you buy inventory in November for your retail store. You shouldn’t wait until you sell that inventory in December to record the cost as an expense. The matching principle requires recording the inventory expense in November alongside any sales revenue generated from that inventory.
Imagine the financial statements as a story about a company’s financial health. This principle ensures the story is told completely and transparently. Financial statements often include footnotes or extra schedules that explain accounting choices or provide more context. Think of them as additional chapters that give a more complete picture.
Financial accounting involves estimates and judgements, but this principle emphasizes avoiding bias. Imagine valuing a company’s brand name. There’s no set price tag. Objectivity requires accountants to use documented methods and avoid personal opinions when making these estimates.
Financial accounting consists of different types of financial statements. We’ll look at them one by one.
An income statement, also known as a profit and loss statement, records the revenues, expenses, profits, and losses generated by a business. Income statements are issued at regular intervals, such as monthly or quarterly. These statements are used within the business by management to look at revenue, expenses, and net income.
A balance sheet consists of assets, liabilities, and equity. It reports a company’s financial status at a specific point in time. As a balance sheet shows what a company owns and owes, as well as its owner’s or shareholders’ equity, it can be used to assess a business's liquidity and solvency.
Assets usually consist of the following:
Liabilities usually consist of the following:
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The cash flow statement, or the statement of cash flows, logs in detail a business’s incoming and outgoing cash. A cash flow statement only logs the cash movement, such as operation costs, financing, and investments. Operation costs could, for example, be expenditures such as employee expenses, which are a movement of cash necessary for employees to be able to perform their roles. These types of cash transactions can be tricky to log accurately, and some businesses find expense management software can help.
A cash flow statement is very useful for financial management as it demonstrates a company's short-term viability. It does this by showing how cash is used and how much working capital is available to cover business debts and pay the workforce.
However, unlike an income statement, a cash flow statement will not show any depreciation, amortization costs, or debt.
This statement, also known as the statement of retained earnings, exists primarily to help shareholders and other investors make decisions about the business’s future based on movements in equity.
It shows the dividends paid and earnings retained by the company during a set time frame. It helps owners see the value of the business, and it also shows in detail the causes of rises and falls in equity over a period of time.
Financial accounting is vital for a business in terms of managerial decision-making and planning, such as whether there is enough money in the company to invest in sales training methodologies to boost revenue via better-equipped sales staff or whether to reduce, retain, or increase assets, staff, and equipment.
Financial statements are also necessary to show the health of a company, in preparing agreements and contracts with groups and investors external to the company.
Examples of external parties who might need to see financial accounting statements include:
Let's use a coffee shop company, Coffee Shop Co., as an example to illustrate financial accounting in action. Here's a scenario for the month of April 2024:
Transactions
Based on these transactions and principles, we can create financial statements for Coffee Shop Co. for April 2024. Here's a simplified example of an income statement:
Financial accounting is imperative for any large-scale business concern. It’s a mechanism for tracking and analyzing financial transactions of all kinds over time. It can give a clear picture of vulnerabilities, pressures, and general business health, as well as the nuts and bolts of where cash is coming from and where it’s going as it passes through the business. It also reveals where capital is held in terms of equipment, buildings, and other assets.
This information reveals a business's often invisible workings and provides crucial data to managers, potential investors, and financial authorities. It keeps your business straight and narrow and gives valuable insights on how to move forward and grow.
The clarity and depth of financial accounting statements are essential to helping your business survive and thrive.
We’ve kicked off 2024 at Fyle with an action-packed quarter marked by exciting new launches, partnerships, and ongoing enhancements.
We’re thrilled to announce our integration with American Express, bringing you direct credit card data, automated reconciliation and the ability to issue American Express virtual cards from Fyle.
If you have an existing American Express credit card program for your business, you can now use the direct feed feature in Fyle to automatically bring all of your credit card transactions into Fyle, giving you instant visibility into card spends. Employees can text their receipts and any mandatory details like project, cost center, etc. to Fyle. We’ll automatically create, code, and match the expense to the right credit card transactions, making reconciliations a breeze!
Additionally, with your existing American Express credit card program, you can now create and issue unlimited virtual cards as an extension of your existing American Express credit line. Issue cards with in-built spend controls and limited for every purpose - travel, vendor payments, software subscriptions, contractors, and more. Your employees can add these virtual cards to their mobile wallets and make payments easily.
Every time users spend, they receive an instant text notification. They can simply reply with a picture of their receipt, and Fyle automatically matches it to the card transaction. Get real-time visibility and control over virtual card payments while retaining the benefits of your American Express credit line and rewards associated with your physical cards. Read more about virtual cards on Fyle here.
IRS guidelines require commute miles (distance traveled between home and work) to be deducted from mileage reimbursements. Fyle’s new automated commuted deduction feature helps you do just this!
Setting up this feature on Fyle is easy. Employees only need to add their Home and Work locations, and Fyle will automatically calculate one-way and two-way commute distances, ensuring precise deductions. You also gain complete visibility into employee activities, tracking applied commute deductions and accessing detailed information on actual and claimed distances. Read more about this feature here.
Till now, on Fyle, expenses could only be split by the employee while creating the expense, before adding it to an expense report. With this update on Fyle, you can now split your employees’ expenses as their admin or approver. This includes expenses that have already been submitted for approval. This eliminates back and forth, saving your time - you can easily split any expense on behalf of an employee without the need to send it back to them.
To ensure that only clean data flows into your accounting integration, you can now restrict any corporate card expenses with pending transaction status from being split or submitted. For transactions coming in from the real-time feed, banks may take a while to settle the transactions, sometimes causing a difference in the pending and posted amounts. With this restriction, only expenses with posted (settled) transactions are submitted for approval and subsequently exported to your accounting integration.
Another exciting news! Fyle now integrates with MS Dynamics 365 Business Central, becoming the only expense management software offering a pre-built integration with MS Dynamics 365 Business Central.
This two-way integration enables you to seamlessly import your Chart of Accounts as Categories and Vendors as Merchants into Fyle and export Expenses from Fyle as Journal Entries and Purchase Invoices in MS Dynamics 365 Business Central.
This integration can be set up in just a few simple steps within Fyle. You can also set up automatic export of expenses from Fyle to MS Dynamics 365 Business Central, with complete customization of the exported data. Learn more about this new integration here!
Fyle has introduced a two-way integration with Sage 300 CRE, becoming one of the first expense management systems to offer direct integration with an on-premises construction accounting system. This integration enables the direct export of reimbursable and credit card as AP invoices, complete with detailed expense coding using Job, Cost Code, and Category from your Sage 300 CRE account, significantly reducing your manual workload. Learn more about the integration here.
Based on valuable customer feedback, we have enhanced the Fyle-TravelPerk integration, offering extensive customization options for how you set up the integration. This includes the ability to configure payment profiles, designate expense creators, determine invoice structure, and map booking types to specific Expense or GL accounts. Once set up, the integration operates seamlessly, streamlining the entire expense management process for all your travel expenses.
You can now seamlessly export expenses from Fyle directly to accounting systems like Netsuite and Sage Intacct from the Reports page. This feature eliminates the hassle of toggling between tabs, making your workflow more efficient. Following its success with QuickBooks Online, this feature is now available to Netsuite and Sage Intacct customers and will be extended to Xero customers as well in the upcoming quarter.
There are more exciting updates coming up in the next quarter!
The Fyle-Netsuite integration is going through a massive revamp following the success of the upgraded versions of Fyle’s integrations with QuickBooks Online, Sage Intacct, and Xero. This will reduce the onboarding time, enhance the export experience, and simplify error resolution, making using this integration effortless!
We’re also building a Budgets dashboard- where you will be able to track budgets in real time! As employees add expenses on Fyle, you can actively monitor the utilised and available amounts for all budgets you have created in Fyle. For each budget cycle, the data will help you for reporting and auditing purposes.
Business trips are an exciting part of the professional world. They offer opportunities to connect with clients, explore new markets, and learn from industry experts.
But let’s be honest, the whole act of filing an “expense report” can leave a bad taste in your mouth after an exciting journey.
Fear not, this guide will equip you with the knowledge you need to navigate your T&E expenses like a pro!
T&E stands for ‘travel and expenses’ and is sometimes also referred to as ‘travel and entertainment.’ It includes all the work-related expenses you incur while traveling for business. Think of it as a budget for everything that fuels your professional adventures. This includes flights, hotels, meals, local transportation, and conference fees.
While first-class flights might be reserved for bigwigs (for now), most companies reimburse reasonable expenses that keep you focused on work and not your wallet. Here’s a breakdown of the usual suspects:
Flights, trains, taxis, ride-sharing apps, and even rental cards to make a great impression during that important presentation. The IRS considers the cost of standard mileage, tolls, and parking fees as deductible business travel expenses.
Hotels, Airbnbs, or any accommodation that you find suitable to keep you well-rested. The IRS allows deductions for reasonable lodging expenses, but remember these are typically limited to the federal per diem rates for the area you're visiting.
Business lunches to discuss strategy, dinner with clients, or even a grab-and-go breakfast at the airport. However, it’s important to note that currently, only 50% of business-related meal expenses are deductible by businesses under IRS Publication 463.
Conference feeds, registration costs, and sometimes business-related phone charges (double-check your company’s policy just to be sure!)
A clear T&E policy is like a compass, guiding both employees and employers through the world of business travel expenses. Here’s what it should cover:
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What are the benefits of a well-defined T&E policy?
T&E expenses are a powerful tool for business growth, but managing them effectively is crucial. Here’s why:
By striking a balance between cost control, employee satisfaction, and compliance, businesses can leverage T&E to achieve strategic goals and fuel growth.
Let’s be real; managing T&E expenses can feel like an episode of your least favorite paper-work-filled reality show. Here are some common struggles that can turn your business trip into a bit of a nightmare:
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Cutting costs is a priority for any business owner, but business travel expenses always seem like a drop in the bucket. Here’s why you should reconsider:
Most companies still rely on manual expense reporting, leaving room for errors and missed spending. Fyle can offer complete visibility into your T&E spending, ensuring you capture every expense.
Transparency is key. With Fyle’s data, you can identify areas for significant savings, like repeat vendors with high prices or out-of-policy employee spending (which is almost 20% of all T&E expenses!). Use this leverage to negotiate better rates and eliminate wasteful spending.
Faster Reimbursements, Happier Employees
Even infrequent business travelers must be reimbursed promptly. Fyle streamlines the process, ensuring employees get their money back quickly.
Imagine a world where business travel isn’t bogged down by paperwork and receipt collection. A world where you can focus on building relationships, exploring new markets, and achieving strategic goals. This is the power of efficient T&E management with Fyle.
How does Fyle achieve this? Through direct integrations with Visa, Mastercard, and American Express.
Employees receive real-time transaction notifications via text message, each time they swipe their business credit card. They can then simply reply with a picture of the receipt for instant reconciliation and expense categorization.
Fyle streamlines the entire T&E process, freeing you and your team to focus on what truly matters. Sign up for a demo today!
Let's start with this. Corporate travel is not like it is portrayed in the movies. Many corporate travelers who regularly travel for work know there is much more to it than just packing their bags and jetting off.
From start to end, the entire corporate travel management process can be a tiring and time-consuming ordeal for everyone involved. How? Let's break it down.
Imagine doing all the above tasks with a manual system! If your business goes about these processes with traditional means, it will result in wasted time and effort and open doors for errors and potential fraud. This could be detrimental to the financial health of your business.
This is where a travel and expense management software comes into play. The software eliminates all the undue stress and headache that comes with your T&E process and automates and streamlines the entire process from pre-trip to post-trip reimbursements while ensuring visibility and transparency throughout.
Are you interested to learn more about how a T&E software can benefit your organization and employees? If yes, this is the ultimate 2022 guide to helping you pick the best travel and expense software that fits your business needs. Let's get started!
A travel and expense management software is designed to automate, simplify and streamline travel and expense management for businesses of all sizes. In addition, most travel and expense management software are device-agnostic, which means traveling employees can access the software using any device and keep track of their expenses. Thus, it is safe to say the software is built to do the heavy lifting for both your Finance teams and employees, freeing up time for them to go about other important tasks.
The software can also:
Using the software, Finance teams can also have complete visibility and control over all business expenses across departments, cost centers, and more. As a result, they can also identify cost-saving opportunities and optimize costs wherever necessary.
The travel and expense management process requires numerous stakeholders to work in sync to get the job done. As a result, there are many moving parts when it comes to streamlining the entire process.
Below, we have compiled a list of pain points that businesses with a broken T&E process face. If you relate to any of the challenges below, maybe it's time for your organization to consider switching to a travel and expense software.
Reimbursement delays can occur due to several reasons. It can be due to:
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An over-reliance on people to be actively engaged with their expense reporting and management duties can cause a choke-hold in the process. When companies use offline tools for things like approvals, the entire process is at a standstill because they need the manager's approval, and he/she might be unavailable to take action immediately.
Let's say a travel manager needs to book a flight for an employee. And his current travel booking method or tool has no connection to the company accounts. He now has to go through multiple tools, software, and possibly agents before he finally completes the task. At the same time, he has to keep going back and forth between the approvers and the travelers so that everything is under the company guidelines.
This decentralization is another cause for creating a bottleneck in travel booking. The dependencies on these outdated approval processes can cause substantial damage to your cash flow and also your employee's morale.
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If you're still incorporating spreadsheet and Excel-based reporting in your expense workflows, it can pose a threat to your financial health in the long run. Additionally, relying on outdated methods means:
Having unclear T&E policies can impact business spending later on. Here's how.
One of the biggest challenges organizations face is figuring out what their company is spending on and missing out on.
Simple spreadsheets don't provide enough, as they are singular data points that have difficulty showing their connection with everything else. An organization needs a solution where an individual can view how all types of expenses interact and affect each other. This is one of the critical areas an automated expense management software can help.
An automated T&E software comes equipped with features that help track all expenses and allows users to view detailed reports and the status of expense reports in the reimbursement cycle. With all the expense data coming under one travel and expense management dashboard, Finance teams can view spending trends and patterns based on real-time insights. As a result, they can make informed decisions and develop a solid financial plan by leveraging their company expense data.
With a travel and expense management software like Fyle, corporate travel can be as simple as the image shown above. Fyle covers all your travel requirements, from pre-trip arrangements to employee expense reimbursements.
Some of the common features and benefits of an ideal travel and expense management software are:
Corporate travel booking can become tedious if your Finance team has to go back and forth with your employees and travel managers. This is because, even after making the bookings, Finance teams still have to manually collect and consolidate the details into their system.
But with an T&E management software that offers integration with a corporate travel booking platform, Finance teams can have tighter control and visibility into the travel expenses. They can also reduce the unnecessary back and forth and eliminate manual data entry work.
Additionally, with expense management automation, employees need to simply fill in the necessary details and make travel bookings before a trip. The reimbursable expenses get automatically created in the travel and expense software, and they can simply send the trip report for review. Finance teams can also review and approve trip reports right from their T&E software. With all the travel-related details under one platform, Finance teams can easily access, view, and draw valuable insights from the reconciled travel expense data.
While on a business trip, the last thing your employees should be worried about is missing receipts or losing track of their expenses. Having a device-agnostic travel expense management software can help traveling employees track their expenses right from their mobile phones.
Additionally, a travel expense software like Fyle offers multiple ways to track employee expenses and receipts.
Duplicate claims, data entry errors, and missing receipts are just a few policy violations that can pass unnoticed if your Finance teams are not thorough with their reviews. But checking for T&E policy violations on all employee expense reports can not only be tedious but also consume a lot of valuable working hours.
But thanks to the real-time policy check feature available in a T&E software, Finance teams can have tighter control over their expense limits, rules, and guidelines. They can also configure the software as per their T&E policy to guarantee no policy violations get by. This ensures any errors or anomalies in an expense report are corrected before the employee even submits it.
Your employee travel expense reports hold a lot of information to help your Finance teams gain better insight into your company’s business travel spending and trends. But if you are managing your travel data manually or using an age-old solution, it can be a painful task to compile and make sense of all the data.
A travel and expense management software not only helps store all your employee travel bookings and expenses under one platform but also helps Finance teams make better data-backed business decisions. Using the data analytics feature available on Fyle, Finance teams can toggle and see information like their top spenders, spend by project/department, top category spend, and more. This ensures they always stay on top of all things business expenses.
Using a T&E management software, your Finance team can ensure speedy payments to employees and close the reimbursement cycle on time. Fyle comes equipped with the next-day ACH feature that can streamline your reimbursement process and help you track the statuses of each payment in real-time. Plus, with Fyle’s single click reimbursement feature, your Finance team can make payments to employees in bulk saving time and increasing productivity in the process.
If you search for the term "travel and expense management software, " several TEM software will probably pop up on your search browser. However, if you're looking to invest in the tool, you probably want something to help you scale and streamline the process seamlessly.
The ideal expense software should be flexible and have configurable features, with plans and packages tailored according to your company size and needs. Thus, while choosing the tool, you'd ideally want to stick with a software that you and your employees can use for the long term. An easy way to start is by considering the current challenges your employees and teams face and how the tool can solve them.
No matter why you're looking to switch to a T&E management software, the right software is the one that can match all your needs.
Source: G2
The potential travel management software shouldn't make you break your bank. The best options are those reasonably priced tools that still offer features necessary for you to simplify your T&E management process.
At Fyle, we make sure we charge only for users who create at least one expense report in a month. We call them active users.
Like most software subscription tools, our travel and expense management software has three different service tiers that you can choose from to meet your requirements.
You can choose to pay for the plans either monthly or annually.
You can choose the subscription package based on your budget, expected usage, and active users.
Our travel and expense management software is built to simplify business travel bookings and expense management. At Fyle, we understand the pain points of T&E and aim to create a tool that’s user-friendly, intuitive, and can be accessed from anywhere, anytime, and by using any device. Our Fyle app is available as a web app and is also available for Android and iOS devices.
We also come with a best-in-class customer support team that is available 24/7 with a turnaround time of less than 4 hours to help your team with any changes, travel emergencies, and questions you may have. With Fyle, stay rest assured that your travel manager, employees, and Finance teams always stay on track.
Check out what our customers have to say about us here. Additionally, if you’re interested to see our product in action, feel free to schedule a demo with us!
Are you paying attention to your corporate travel and expense management?
You should. Because according to GBTA (Global Business Travel Association), annual corporate travel spending will reach $1.4 trillion by 2024.
If you are struggling with your travel and expense management due to your manual setup, it’s time to take a step towards digitization. This is because if you leave your expense management woes unattended, it can significantly impact the growth and scale of your business in the long run.
This article highlights some of the top corporate T&E challenges and how businesses can embrace corporate T&E software to make expense management less frustrating.
As a necessary means of staying compliant, businesses should always ensure employees submit their expense reports with corresponding receipts. This is because expense receipts serve as proof of spending and are crucial during audits. Receipts may either be paper receipts or e-receipts, and a single expense report can often come with multiple receipts. In these cases, the onus of collating, verifying, and documenting these receipts and reports would fall entirely on the Finance teams.
While some businesses believe using expense report templates may solve the problem, the truth may vary. With templates, employees are to manually enter expense details and attach photocopies of receipts as proof of spending. This may result in receipts all over the place and in varying formats. For example, with a car rental for work, you have receipts from the rental agency, gas stations, and parking validation - that’s already three different types of receipts for just one corporate travel expense.
To add to the confusion, these templatized expense reports make it easy for missing, incorrect, and exaggerated entries to slip by. In these cases, Finance teams are to manually identify and address issues with multiple employees over multiple expenses. Further, all clarifications and justifications for these business expenses go unrecorded as they happen over emails, calls, or word of mouth. This translates to zero clarity and a highly ineffective means of managing business expenses and receipts.
How can a travel and expense management software help manage receipts?
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Is your travel and expense policy clear and comprehensive? Is it easy to understand and document every step of your travel reimbursement process in detail? If not, then the chances are that it may be contributing to employee expense reporting frustration and poor reimbursement turnaround time.
Unclear T&E guidelines can lead to policy violations, out-of-policy expense claims, and finance teams spending more time going back and forth with confused and frustrated employees. This translates into productive time wasted over something that could have been curbed from the beginning.
Your travel and expense policies work as your one source of truth when it comes to employee reimbursements. Unfortunately, most companies pay no heed to their policies, and as a result, so do their employees. This results in out-of-policy expenses and other policy violations, which cause unnecessary financial leaks in the system.
How can a travel and expense management software help enforce policies?
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Expense management tasks can be frustrating for both employees and Finance teams. For example, employees need to keep a tab of their travel expenses and correctly enter all the information into an expense report template to be reimbursed on time.
After employees submit their T&E reports, Finance teams need to collate all the trip reports from managers and manually identify claims that are not supported by your travel and expense guidelines. Then, in case of a policy violation, the Finance team needs to send back the travel report to the employee in whole or in part for necessary changes or clarification.
This can translate into a costly and time-consuming process. Additionally, due to stringent timelines, they may not thoroughly verify the submitted expense reports and may end up missing claims that might be fraudulent in nature. This behavior over prolonged periods can prove detrimental to the financial health of your business.
How can a travel and expense management software help review and approve expense reports?
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Insight into expense trends occurs when Finance teams have historical and real-time data in hand. But, businesses who use traditional expense management means gain little to no insight as they have no data to refer back to. As a result, you can end up making ill-informed business decisions.
Expense analytics and real-time insight into expense data play an important role in cost optimizations and preventing financial leaks in the system. But, this can happen only when businesses have the numbers to speak for them.
How can a travel and expense management software help with spend insight?
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Delayed reimbursements in a manual travel and expense management setup can be due to a number of reasons. It can be because of:
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The business world is continuously evolving to become highly receptive to the needs of employees. While the choice to automate your travel and expense management software may benefit you as a business, it also is a boon for your employees. Addressing employee challenges has a direct impact on employee morale and productivity. Thus, also impacting the overall financial productivity of your business.
All this and more without your Finance team slogging it out.
Do you want to hop onto the bandwagon of digital change? Fyle does more than just expense reporting. Schedule a demo today to witness how Fyle helps you put an end to your expense management woes.
This post was originally published in 2020, but the content has been updated for 2024.
Post COVID-19, businesses have seen a massive surge in credit card transactions for incoming and outgoing payments. While this made the payment process easier, it also meant a looming nightmare for finance teams at the end of every month – reconciling credit card expenses.
But where do business owners and finance teams start regarding business credit card management?
This blog discusses everything you need to know about credit card reconciliation, how it works, and why it’s crucial for businesses in 2023. We’ll also address some challenges accounting and finance teams face with reconciliation, after which we’ll give you the easiest way to solve your reconciliation woes. Let’s dive in!
Credit card reconciliation is the process by which accountants ensure that the transactions in a business’s credit card statement match its general ledger. For accurate and efficient financial reporting, companies need to know that these transactions took place and that the expenses on both sides are correct and valid.
If done manually, accountants sit and compare an organization’s credit card statement against its general ledger. If every payment on both sides matches, they can determine that the ledger was recorded correctly and can close books for the month.
However, if there are discrepancies, the responsibility of clarifying these values would fall on the financial controller. They need to find out who made the additional payments manually.
The reconciliation process typically occurs at the end of every month, while a more significant financial closing happens towards the end of each quarter or financial year.
As mentioned earlier, a credit card transaction can impact two sections of your business finance: income and expenses. This means companies will have two types of reconciliations:
This would include all your business expenses – payments your organization makes for goods or services. For example, if your business is habitually issuing cards to its employees, they must be reconciled individually.
This would include all your incoming payments. Reconciling these transactions takes a little more effort than your outgoing payments, but there are defined ways to make this easier.
In this blog, we’ll only be looking in detail at the business expenses side; that is, transactions made by you or your employees to purchase goods or services for your organization.
Making a payment for your credit card statement without a second glance may not be the wisest thing to do. Big financial institutions make mistakes too, and it can end up costing you a lot more than what you should be paying.
The reconciliation process starts when a business receives statements for its expenses. The expense details are then manually matched with the company's internal finance records and checked for discrepancies.
This process ensures:
Reconciliation, as we know, involves the process of matching expenses with your internal finance record. But how do you go about the entire process?
Receipts are proof of expenses. It comes in several forms and helps account for money spent. For example, a purchase made using a credit card comes with an invoice given to the customer at the time of sale. These receipts should be collected from all the cardholders and stored for future reference.
Companies ideally use expense reports to collect and store employee receipts. This can be done manually using paper-based excel sheets and reports or by automation-driven tools like an expense management software.
Finance teams should match credit card statements to reported business expenses with the receipts. Businesses can do this with the help of any preferred system for reconciling.
Pro tip: Ensure that other than fees and interest charges, there shouldn't be any other unmarked items in the credit card statement.
There are always chances of error, either with or without intention. Thus, your finance teams need to be careful in identifying and notifying the bank authorities in cases of mistakes. In addition, ensure timely action by reporting any unauthorized activities or fraudulent behavior.
Some examples of commonly occurring errors with business credit card reconciliations are:
Most companies reconcile credit card expenses with paper-based and spreadsheet-driven methods. Unfortunately, this process is inefficient and forces employees to work long hours of manual labor. This also results in more inefficiencies and loopholes in the process. Given below are some challenges that can hinder your finance team's progress:
For employees, reconciling corporate credit card expenses means entering data without making an error. Even a single missing number or double entry can put the employee's reimbursement on hold. Also, routinely submitting expense reports to get back their own money can affect employee happiness.
For finance teams, inaccuracy and inefficiencies in the credit card reconciliation process make the company vulnerable to financial exposure. Also, the traditional reconciliation methods include a high involvement of employees but do little to remove human-prone errors.
Corporate credit cards have helped revolutionize the speed and efficiency of business payments. But this also implies a high volume of transactions. Moreover, the ever-growing number of transactions increases the chances of missing human errors, duplicate submissions, and inaccurate information.
Your accounting team has to sieve through all the transactions and reconcile one-to-one and one-to-many transactions. This can prove to be a costly and cumbersome expense for your company and employees.
According to a survey by Ernst & Young, financial departments spent up to 59% of their resources on managing transaction-intensive processes. Of this, 95% of the effort goes into already matching transactions rather than ones with entry-related problems.
The traditional approach to credit card reconciliation offers no quick and coherent method to find policy violations. Instead, employees must painstakingly go through every transaction to ensure expenses follow the company's travel and expense policies. This further adds to the delay.
Whenever an employee uses the company's credit card for personal expenses or overspends, there is no way of getting notified unless checked manually. Additionally, a loose policy framework coupled with weak enforcement of T&E policies can misinform employees and cause unauthorized purchases. This also increases the chances of fraud and claims of multiple duplicate expenses.
For employees who use the card for personal expenses, there must be a way to flag violations accurately. For example, when matching the expenses with the bank statements, the finance team has to identify and address personal expenses. While reconciling, finance teams also have to make sure that no errors by vendors or credit card issuers get by.
Do your accountants still rely on broken bank feeds and delayed statement uploads for credit card reconciliations?
Just imagine how much easier their lives would be if these transactions were recorded and matched in real time. Well, Fyle’s real-time credit card feeds let you do exactly that.
By connecting directly to credit card networks like Mastercard, Visa, and American Express real-time credit card feeds bring credit card transaction data directly to your expense management system as soon as a card is swiped. This means accountants don't have to wait for bank statements to arrive or chase employees for receipts.
Since the transaction data is available instantly, accountants can track credit card spend, reconcile card expenses, track budgets, and identify unauthorized spend in real-time.
But this is just the beginning; here’s what else you can do with Fyle’s real-time feeds:
Fyle's integration with credit card networks like Visa and Mastercard allows employees to receive instant SMS notifications of all their credit card transactions. This helps them submit receipts for reimbursement quickly and easily, ensuring accurate and timely expense report submissions.
SMS receipt collection allows accountants to collect receipts instantly, which has reduced the time our customers spend on receipt collection by 48%. This simplifies the process by eliminating the need for employees to scan and upload receipts, reduces back-and-forth communication between accountants and employees, and eliminates the need to send reminders.
Depending on your card program, accountants need to wait until the bank makes card data available to manually match transactions.
But now, Fyle's real-time credit card feeds automatically reconcile transaction data with receipt data as soon as the receipt is uploaded by the user. The credit card reconciliation process, which takes days to finish, can now be completed in less than 2 minutes with Fyle. All this without changing your existing credit cards!
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Fyle automatically checks expense reports for policy violations as employees create them. Depending on the organization's settings, the following may happen:
Fyle's duplicate detection and implicit merge feature automatically checks for duplicate expenses. If two submitted expenses are found to be the same, the user is instantly notified and given the option to merge the two expenses. This helps to ensure that expenses are not duplicated, which can help to prevent fraud and improve compliance.
In today’s world, information is at your fingertips. But when it comes to your business credit card transactions, you’re stuck in the dark. You have to wait days or even weeks to get visibility into where your employees are spending money.
That’s where Fyle comes in. We let you see it all in real-time, from anywhere in the world and it’s changing the way businesses manage and reconcile their credit card expenses. With Fyle, you get real-time insights into your credit card spend so you can make informed decisions about your finances.
Want to see how Fyle can help you? Schedule a demo today!
Does your finance team have a trusted credit card management system to manage all employee corporate credit card expenses effectively?
Corporate credit card usage is on the rise due to its ease of use. With these cards, employees no longer need to worry about using their own money for business expenses. But with these cards, it becomes all the more critical to effectively track, monitor, and stay on top of things. If ignored, it can rack up extra chores for the entire team. Even worse, it could severely affect your company's bottom-line due to prolonged financial leaks.
But how does one go about picking the right credit card management system for their business?
In this article, we talk about how Fyle as an expense management software can help your finance team tackle challenges related to credit card management and more. Let's dive in!
Credit cards as a payment method have their own set of pros, but keeping track of spending can be difficult. Even a simple task can become demanding, taking up time and effort from your finance team and employees. Traditional methods for managing credit cards, bring with them a set of challenges that could pose a threat to the financial productivity of your business. Here’s why:
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Best Practices to manage Corporate Credit Cards
Fyle has several features that can help you ease your corporate credit management woes. Our automated solution makes sure all the monotonous routines around expense reporting and corporate card management are taken care of. This spares extra time for your finance team to do more intuitive work and put their skills to better use. This also increases productivity and boosts the morale of your team as well.
Fyle as your credit card management system can help you achieve multiple goals in a short period. Here’s a look at some of them:
Irrespective of whether you’re a small business with few cardholders or a large enterprise with multiple cardholders, Fyle allows you to manage all your corporate credit cards with ease. Once your organization’s card feed is set-up, you can easily assign your company’s credit cards to your employees. Additionally, your finance team can also track and monitor all assigned and unassigned cards. This provides for a wholesome approach to effectively managing business credit card expenses.
On assigning cards to users, all the expenses incurred will be directly reflected in your Fyle account. The finance team can then view all the payments made using credit cards. They can also see which of the corresponding expenses are yet to be reported. Additionally, the team can filter and view expenses for desired timelines. Lastly, finance folks can also customize and send timely reminders to employees to match their expenses on time.
When multiple employees are assigned to various credit card providers, tracking all the transactions in their bank feed can be a demanding task. Fyle takes care of this problem by syncing all your corporate credit card details with direct bank feeds. By integrating directly with the bank providers, you can expect to get a clean feed in real-time. Additionally, we provide a reliable data flow of all your corporate card expenses. This ensures complete protection over your company’s bottom-line.
Sometimes a merchant may unintentionally charge twice for a purchase made through the corporate’s credit card. While it may not be a significant loss, it is necessary to make a note of for accounting purposes - duplicated charges can cause confusion and imbalanced records.
At Fyle, we understand finance teams can easily miss transaction reversals, leading to accounting errors. This is why we created our feature that seamlessly matches every expense to its corresponding transactions.
Pro-tip:
In cases of extra charges, employees need to support their claim with the help of receipts and relevant expense entries.
With a better credit card management system in your hand, you can stay prepared for the tax season as well as for audits. Fyle makes sure that your finance team stays ready without rushing or worrying at the last minute. Our expense management software comes loaded with features that can help your finance team tackle the challenges of accounting. Here are few such instances:
Choosing to handle your corporate credit cards in the old-fashioned way brings numerous challenges tied to it. You may have cards from multiple card providers to suit your needs, but tracking its usage through disparate systems becomes a whole other problem. When you do not own a centralized software to track all cards, identifying assigned cards can be confusing as well. Additionally, when it comes to staying audit-ready, tasks such as reconciliation can become taxing on your finance team.
At Fyle, we understand the challenges that come with managing corporate credit cards for your business. Thus, we have come up with features that will ease the burden on your finance team. This means automating mundane tasks, easy integration, providing direct bank feeds, and matching expenses accurately. With our features available at your disposal, your finance team’s productivity can be optimized and enhanced to help meet business goals.
Want to know more? Schedule a demo with us today to see how Fyle magic works!