Business credit and charge cards can do much more than facilitate business purchases, they can make account reconciliation much easier.
Victoria Haas, CPA, says when she works with clients, one of the first questions she asks is if they have a business card. “From an accounting standpoint, it is important and really it helps to create a more organized, better, faster, more efficient way of record-keeping," she says.
For Craig Bolanos, founder and chief executive officer of Wealth Management Group, using business cards to reconcile accounts “is a must for the small business enterprise" as they formalize operations.
One of the key benefits to using a business card is getting the detailed statements about purchases, says Crystalynn Shelton, tax analyst for FitSmallBusiness.com. “A lot of times people aren't great about keeping track of those receipts; I think it's a great way for them to easily get a recap of what they purchased," she says.
More frequent reconciliation allows us to educate and train the team members on the proper use of the card that's within their possession.
–Craig Bolanos, founder and CEO, Wealth Management Group
Most popular accounting software can connect to credit cards, which automatically download transactions, which saves time versus manually entering information. “It definitely helps them to make sure they don't miss any expenses because if it's not in the accounting software, and it's not in the financial reports, that means it's not going to get on that tax return as a deduction."
Because business card data can be downloaded electronically, Bolanos says his team now reconciles accounts on a weekly basis, rather than twice a month as they used to do. That helps them quickly spot any discrepancies. “Stuff like that does come up from time to time, and it's no one's fault. There are just errors that are happening," Bolanos says.
Once businesses start growing and there are more authorized cardholders, frequent reconciliation is necessary, he says. “More frequent reconciliation allows us to educate and train the team members on the proper use of the card that's within their possession," he says, which can be as simple as teaching purchasing managers to buy office supplies in bulk.
Dan Wywrot, co-founder and director of finance at Paro, which offers outsourced accounting services, says business cards help their firm stay ahead of account reconciliation, especially when there are many cards being used. He says Paro has business cards for department heads, so when expenses come in the bookkeeper or accountant knows how to group the transaction.
“They already know if this charge came from the head of sales, it's going to be a sales-related expense. If it's from the VP of engineering it's probably going to be a tech-related expense. You already have a head start and that's going to result in a less of a headache for your bookkeeper and less of a headache for you," he says.
Business cards can be helpful when trying to stop fraud. Shelton says she's had fraudulent transactions appear before, but because she reviews her transactions frequently, it was easy to stop with a call to the credit card issuer.
In addition to making the accounts receivable side easier to reconcile, business cards can also be used on the accounts payable side, says Raymond Siffel, managing partner of Calibr Merchant Solutions.
He says after the credit crisis in 2008-09, many banks weren't offering lines of credit to small and medium-size businesses, but they were offering commercial or purchasing credit cards to effectively replace credit lines. These specialized cards let small businesses manage invoices and pay vendors, and gave them some float.
“Between 2008 and 2012, we saw a huge spike in businesses that were managing their accounts payable with purchasing or commercial credit cards, whereas before it was mostly reserved for very, very, large businesses," Siffel says.
Business cards also give small businesses an extra layer of protection when buying from vendors, rather than writing checks, particularly important when establishing new relationships. “With credit cards if the vendor isn't who they say they are or the product isn't what they say it is, the business has the right to dispute that charge," he says.