Card payment reconciliation is the process through which one ensures that all card payments (transactions) accepted at point-of-sales systems or payment applications, plus subsequent adjustments, are in fact received in the bank accounts. Although such reconciliation is one of the most essential tasks that any business accepting card payments should perform, it is too often simply neglected.
Businesses have cashiers and staff members count cash daily and then double check, plus implementing various processes, to ensure that not a single penny is missing. However, too often the same businesses do not have consistent (or any) reconciliation processes in place for card payments. At the end, it is money just as much as cash.
In fact, card payment reconciliation should be a much easier process once implemented than cash reconciliation, because it is a much more automated process and staff members can have access to reporting solutions and tools from various providers involved in the card processing flow.
One basic reason for not having proper card payment reconciliation processes may be that processing and bank deposits are automated. Staff might not fully understand how card processing works, and too often card payment reconciliation is looked at as a very frustrating task that cannot be figured out.
Payments associated with card payments seem to be deposited regularly in the bank account, so people do not pay attention to what is actually happening and simply operate on the assumption that all is accurate. Only to find out one day that significant amounts are missing. At that point, it is often too late to act and the only possible outcome is for the business to accept a loss.
There is no magic with reconciliation. It needs to be completed so that accurate receipt of all payments can be validated. Remember, the ultimate goal of reconciliation is to identify discrepancies, should there be any, so proper actions can be promptly taken.
Following are a few essential items to consider for card payment reconciliation:
Teamwork
Work as a team within different company departments involved (operations, finance, IT, etc.) and work hand-in-hand with all vendors involved in card process (payment application suppliers, third-party providers, processors, banks, etc.). Ask vendors which reports and tools they have available that can be incorporated into the reconciliation process.
Understand the processes
Make sure the card payment processes and reconciliation processes are fully understood. If one does not understand the transaction processing flow, how card processing works and what needs to be accomplished, chances are that the reconciliation process is not correct. Make sure your current reconciliation process is accurate. Do not assume that what may be in place is accurate. It may need to be updated.
Bank deposits
Bank deposits are not instantaneous. There are several days between payments completed on the payment applications and the bank deposits. In addition, depending on the country and the card type, the number of days can vary. In other words, not all payments for one day will get deposited into your bank account on the same day.
Processing fees
In most cases, processing fees by the processors are withdrawn ahead of the bank deposits. Account for the fact that the amounts deposited into your bank account will not be exactly the amounts accepted on-site, but are the amounts accepted minus the processing fees.
Create a “reconciliation table’
Individual reports from different systems and vendors should not be reviewed individually when comparing data. All data should be centralized into a single reconciliation table so that data from the different reports can be analyzed side by side. A basic reconciliation table should at least allow accounting for payment date by card type and bank deposit date by card type.
Ensure data accuracy
One must be absolutely sure that the data used are, in fact, the data that are needed. One common mistake is the use of reports that are created based on the wrong queries and parameters.
For example, a report by settlement date (transactions confirmed for payment to the processor) when one is thinking it is by date of payment accepted on-site. In many cases, especially for automated systems these two dates can be one day apart. Another example is the use of a report by “authorization date” vs. a report by “business date” when the business day is 4 a.m. to 4 a.m. The authorization date is always midnight to midnight in the local time zone, so after midnight, it is tomorrow, when in fact the business day ends only at 4 a.m.
Also, ensure that the revenue reports being compared are based on the same time frame. For example, if one report includes revenue for the 24-hour period from 8 p.m. to 8 p.m., while another includes revenue from midnight to midnight, the data will not match. In this situation, the business needs to decide which business day should be used and to ensure that all systems and reports open/close at the same time.
Not all transactions are part of revenue
Make sure that the transactions included in the reported card payment revenue do not include any declined transactions that are obviously not completed and accepted payments.
Account for all transactions, adjustments
All refunds/charges from all p”ayment solutions using the same merchant account – plus all refunds, all charges created/issued by various groups within the organization (e.g., finance or customer service groups), and all charge-backs and disputed amounts – must be included in the total for the amount to be expected in the bank deposit for each day.
Card payment reconciliation process is an essential business task and requirement, but it can be frustrating. However, it must be completed daily. With the proper implementation and use of tools provided by vendors, the process can be streamlined and become a simple normal daily routine.
Fabien Pesenti, Country Manager for Six Card Solutions USA, can be reached at fabien.pesenti@3cnorthamerica.com.
