Business credit cards are convenient and generate a large share of most small businesses' transactions. They are also where personal charges, duplicate entries and missing receipts accumulate. A monthly reconciliation keeps the card balance in your books equal to what the bank says you owe.

Treat each card as a liability account

Each card, or each card program with shared billing, should have its own liability account in the books. Charges increase the balance; payments and refunds reduce it. Recording card payments as an expense is a common error that double-counts every purchase.

The monthly routine

  1. Start with the statement closing balance
  2. Compare it with the book balance for the same date
  3. Tick off each charge, refund, fee and payment on the statement against the books
  4. Add missing transactions: often foreign transaction fees, interest or annual fees
  5. Remove duplicates: often created when a receipt was entered manually and the bank feed also imported it
  6. Confirm the difference is zero, then save the reconciliation report

The same logic applies to bank accounts; see our monthly bank reconciliation guide.

Payments between accounts

A payment from the business checking account to the card is a transfer between two balance sheet accounts. If both the bank feed and the card feed import it, record it once as a transfer.

Receipts

The IRS's recordkeeping guidance explains that you need documents supporting the amounts on your return. A card statement shows that money was spent, not what it was spent on. Capture receipts at the time of purchase, especially for meals, travel and equipment; see travel and meal expense records.

Personal charges

Personal purchases on a business card should be recorded as owner draws, or as amounts owed by the employee, not as business expenses. Better still, keep personal spending off business cards; see separating business and personal finances.

Employee cards

When employees hold cards on the business account, require receipts and a business purpose for each charge, ideally through an expense app. Reconcile each cardholder's transactions monthly so questions are asked while memories are fresh.

Refunds and disputes

Refunds should reduce the original expense category, not be recorded as income. Disputed charges remain in the balance until the dispute resolves.

Rewards

Cash-back rewards on business cards are generally treated as a reduction of the cost of purchases, not as income. Record them consistently and ask your preparer about your situation.

Our bookkeeping services reconcile every bank and card account monthly.

Handling common problem items

  • Personal charges on a business card: record them as owner draws or as amounts due from the owner, not as expenses
  • Recurring subscriptions: set up rules in your software, but review them monthly so cancelled services do not linger
  • Foreign transaction fees: record them separately; they often appear as small charges the day after the purchase
  • Rewards and cash back: record redemptions consistently, commonly as a reduction of expense or other income; ask your tax preparer which treatment to use
  • Refunds: match the credit to the original charge so the expense is reversed in the right account
  • Annual fees and interest: record to bank fees and interest expense

Timing

Reconcile each card to its statement closing date rather than the calendar month end. That way the ending balance matches a document you can file with the reconciliation report, which is useful evidence for your records.

Key terms

Definitions for terms used in this guide, from our small business glossary:

  • Balance Sheet: A balance sheet shows what a business owns, what it owes and the owners' equity at a specific date.