You are not alone if you have ever opened your bank statement and said, “Wait, I didn’t spend that much at the Café!” It may surprise you to learn that bank card theft and errors are quite common, in fact, so common that you cannot even imagine. According to the Nilson Report, the damages from card theft worldwide totaled $32 billion in 2021. Be it a genuine mistake or a complex scheme, don’t you think identifying these problems can help you to save your business? Yes, it can! Just by simple bank card reconciliation.
So, what is this thing? How can it help detect errors and fraud? And most importantly, how can you make it work for you? Let’s explore it in detail.
What is Bank Card Reconciliation?
To put it simply, bank card reconciliation is the act of making sure your bank statement and your financial records match. Every transaction in your records should match what your bank reports.
Think of it as your financial lie-detector test. Did you actually approve of that payment to “Mystery Subscription Inc.,” or was your account sneakily tapped?
The Twin Threats: Fraud and Errors
1. Fraud
Fraud is an intentional attempt to steal and deceive. It can take many different forms:
• Unauthorized Transactions: Your card information is stolen, and purchases are made.
• Phishing Scams: You are fooled into revealing your credit card information.
• Internal Fraud: An employee may use your business credit card for personal expenses.
Let’s say you are the owner of a small firm, and your dependable employee “accidentally” purchases a high-end gaming console using a corporate card. That “accidental” charge might go unreported if there is no adequate bank card reconciliation.
2. Errors
Errors are accidental but can be just as harmful as fraud.
• Transaction Duplication: You may have been charged twice for the same coffee at that café.
• Bank Errors: Misapplied deposits, incorrect charges, etc.
• Errors in data entry: Misclassified expenses may result from a typo or a missing digit.
For example, when you place an order for materials for your bakery, the vendor’s system charges you $1,000 rather than $100. You might not realize it until it’s too late if there is no bank card reconciliation.
How Bank Card Reconciliation Makes it Easier to Identify Fraud and Errors
1. Clear Transaction Tracking
By providing you with an overview of all your transactions, bank card reconciliation enables you to identify any discrepancies. When all of your expenses are categorized and compared to your records, fraudulent or incorrect expenditures become visible like a sore thumb.
For example, suppose your bank statement shows a $500 transaction for office supplies, but your records indicate a $200 transaction. This discrepancy would be identified for additional research right away by reconciliation.
2. Finding Trends
Before going on to larger amounts, scammers often start with small and undetectable charges to test the waters. You can go for regular bank card reconciliation to identify any unusual spending habits.
Pro-Tip: Don’t ignore a $1 charge that appears from an unknown source. It might be a scammer’s test run.
3. Identification of Errors
Correct bank card reconciliation guarantees that typos, duplicate charges, and other mistakes are not ignored. Businesses with large transaction volumes will find it extremely useful.
4. Ensuring Compliance
Firms must keep accurate financial records to comply with tax laws and undergo audits. Bank card reconciliation guarantees that your financial records are correct and up to date while also assisting in the detection of fraud and mistakes.
How to Reconcile Bank Cards Accurately
1. Match Transactions Regularly
Don’t put off making a reconciliation until the end of the month. You can detect problems before they become more serious by conducting weekly or even daily checks.
For example, a charge for “Luxury Spa Resort” that was made over the weekend is noticed by a business owner who does weekly reconciliations. They quickly contested the claim.
2. Make Use of Accounting Software
Bank card reconciliation is made easier by modern technologies that automatically match transactions, such as QuickBooks. You can cut down on mistakes and save time with these tools.
3. Verify Vendor Names Again
Sometimes, the name on your bank statement may not be the same as the company name you are familiar with. Joe’s Coffee, for example, could show up as “JC Beverages LLC.” These discrepancies are clarified through bank card reconciliation.
4. Keep Receipts
Although it can be inconvenient, keeping receipts, even digital ones, speeds up and improves the accuracy of reconciliation.
5. Educate Your Team
Make sure staff members are taught to recognize fraud and mistakes if you are giving them responsibility for bank card reconciliation.
Conclusion
Accurate bank card reconciliation serves as a protection against fraud and inaccuracies that may be hiding in your bank statements. You can identify problems early and protect your money by regularly matching transactions, using modern technologies, and remaining attentive.
Notice any suspicious transactions from your bank account? Reach out to us! Remember, in today’s financial world, being vigilant always pays you; therefore, let us reconcile your accounts so you are protected from any kind of mistake or fraud. Contact us today!