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What is Pluto Card?

Leen Shami

October 1, 2022

5

What is Pluto Card?

At Pluto, we believe better expense management should be within everyone's reach. We solve MENA finance teams' pain points by replacing their business credit cards with Pluto corporate cards to help manage their expenses, saving them time and money.

How do we do that?

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Create Unlimited Corporate Cards

When multiple employees have access to one company credit card, it can be difficult for finance teams and business owners to track how much is being spent and where.

The result: everyone texting the CEO or CFO for OTPs during important meetings.

Pluto makes it easy to create and distribute virtual and physical corporate cards to each employee. Not only does this minimize fraud risk, but it also makes expense tracking simpler for finance teams, CFOs, and CEOs.

With Pluto’s unlimited corporate cards, you’ll be able to:

  • Create virtual cards in seconds.
  • Receive physical cards in 1-2 days.
  • Use cards for vendor-specific cases.
  • Assign every employee a budgeted corporate card.

Spend Control

Are you running ads at a cost that exceeds your marketing budget? Are you providing new hires with an allowance to cover the costs of their office equipment and software, or do you offer employees additional perks such as a monthly gym stipend?

Pluto gives you the ability to set limits and take control of your company’s business expenses, hassle-free.

With Pluto’s all-in-one expense management platform, you’ll be able to:

  • Assign virtual or physical cards with spend limits.
  • Allocate a specific budget towards daily, weekly, or monthly expenditures.
  • Create a single-use purchase card that automatically deactivates once it is used.
  • Control spending for different departments by allotting a budgeted amount to be spent.

Goodbye overspending 👋🏼

Reimburse In Record Time 

Reimbursements can be a painful process when the end of the month rolls in. Whether you’re scrambling to find lost receipts, trying to match receipts to their expenses, or organizing them in a document, there’s no easy way.

Drag & drop receipts

Pluto makes it easy for employees to list receipts.

Once a business expense is made by an employee, they’ll be able to drag & drop an image or screenshot of the receipt onto the Pluto dashboard.

Yes, as simple as that.

Easily reconcile receipts

Pluto allows you to seamlessly submit your receipts onto the platform. With Pluto, reconciliation is a breeze.

Once a business expense is made:

  • Attach receipts to card transactions with just a few clicks.
  • Transactions will automatically be categorized.

Add a memo to every transaction.

Get reimbursed in minutes

Waiting till the end of the month to get reimbursed for out-of-pocket business expenses is no longer necessary! 

Pluto gives you the opportunity to get reimbursed in minutes.

Once a reimbursable out-of-pocket expense is made, head to the Pluto dashboard to log the expense and get reimbursed as soon as it is approved.

Get Real-Time Data

Your month-end expense report comes in—and you find that you've spent more money than budgeted. Again.

With Pluto, you can stay on top of your expenses at any given moment.  

By getting real-time data, you can view reports of your company’s spending and ensure that your company’s finances are in check.  

It's simple, Pluto helps you avoid overspending and keep track of your company's finances in real-time.

So what does this mean for you?

  • See transactions happening on your cards in real time.
  • Receive notifications about every single card transaction, if needed.
  • Collect information on which vendors your company is spending the most money with.
  • Identify which employees or departments are spending the most.
  • Get an overview of the expenses you have incurred daily or month-to-month.

Pluto allows you to adjust if spending has gone off course—and plop some celebratory balloons if it hasn't 🎊!

Integrate With Other Platforms

Every business has multiple platforms, and we know how important it is for them to talk to each other. Pluto's integrations make it easy to get started and ensure you have all the data you need in one place. 

Accounting Integration

Pluto syncs your company's transactional data to the most popular accounting platforms through direct integrations so you can automate your accounting and close books faster.

No more end-of-month mayhem! 😅 

Mobile Wallet Integration

Pluto Virtual Corporate Card

With Pluto, you can add your virtual or physical cards to your digital wallet to make transactions seamless and easy.

We support Google Pay, Android Pay, and Samsung Pay.

What Else Does Pluto Offer?

Pluto gives you the opportunity to scale your business, without having to worry about the smaller details.

No FX Fees

Pluto doesn't charge you any foreign transaction fees for using your Pluto corporate card outside of the UAE.

If your business is expanding rapidly and your team is traveling more frequently, you won't have to worry about those pesky charges eating into your profits.

Or if your company needs to pay for subscriptions, contractors, or freelancers in a different country, you can do so without racking up a bill in FX fees.

Remote teams, frequent flyers, or big spenders, we've got you covered!

Accepted Worldwide

Whether your team is distributed, travels a lot, or makes international payments, Pluto’s corporate cards are accepted worldwide.

Advanced Security & Privacy

Pluto is PCI DSS Compliant. We take the safety of your information very seriously; all your data is stored and processed following the highest data protection standards in the industry. 

Get Started in Minutes

Pluto's sign-up process takes minutes, not hours. By adopting a KYB and KYC process that can be done within a few clicks, you’ll be making transactions in no time.

  • Simple application process.
  • No credit history is required.
  • Fast approvals.
  • Instant card access once approved.

Let us take the hassle out of managing your expenses. Start Using Pluto Today - For Free.

Find out how much your business can save with Pluto

Discover your savings with Pluto's Cost Saving Calculator and take control of your expenses. Unlock cost-efficiency now!

Calculate Now

Learn how Pluto is helping Keyper        to eliminate petty cash spending and optimize spend management

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At Pluto Card, our mission is to assist businesses of all scales make well-informed choices. To uphold our standards, we follow editorial guidelines to guarantee that our content consistently aligns with our high-quality benchmarks.

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Corporate Cards
October 5, 2022

Vlad Falin

Corporate Card Management: Guide for 2024

The realities of the modern business world require companies to keep a tight hold on their spend management.

We’re not just talking about how you track expenses or reconcile your debts; that’s basic stuff. No, we’re talking about the entire process, from deciding who has the spend rights to analyzing how business spending affects your cash flow and taxes.

The more your business expands, the more crucial (and complex) your expense management process becomes. Spending analysis allows you to correct imbalances, watch for fraud and employee theft, and prepare for regulatory filings.

However, it’s also a cumbersome, time-consuming process that, without the use of the proper platform, requires quite a bit of man-hours to complete.

Modern spend and card management needs to be more sophisticated, intuitive, and built on the needs of finance teams, accountants, CFOs, owners, and employees!

That’s why, at Pluto, we firmly believe in the power of proper corporate card management. Establishing clear policies, outlining appropriate spending limits, and designing airtight analysis protocols can keep your finances in check.

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Modern Corporate Credit Card Programs

Traditionally, businesses relied on employee reimbursement for out-of-pocket expenses to facilitate team and department spending. While using employees to frontload business costs helps with float, it also creates potential hardships and liabilities.

Moreover, the process of submitting, reimbursing, and properly cataloging expenses is grotesquely time-consuming for your finance team.

In part, corporate credit cards were designed to take the pressure off corporate finance teams. They make expense management easier, simplify spending procedures, and digitize the bulk of your spending.

Managing corporate credit cards can get quite complex. Adding new cardholders, suspending or closing accounts, or untangling business and personal expenses could take hours of paperwork and phone calls.

But it does not have to be like that. At Pluto, we leveraged our corporate experience, had countless talks with our users, and came up with solutions to every bottleneck of card management.

On-demand corporate cards

For employees to be able to make business expenses, they will need a corporate p card. In our day and age, most of their spending will be online.

Pluto provides you with an unlimited number of virtual cards that can be easily issued right from the dashboard.

If a physical card is needed, you will go through the same simple process, and the card will be delivered to you in just a couple of days.

Receipt Capture and Expense Tracking

Corporate credit cards feed your business expenses into a centralized monthly report. With Pluto, submitting a receipt is as easy as taking a picture with your phone, literally.

When the expense is submitted, it is immediately reflected in the account report.

These reports provide each department head and finance team with the visibility needed to:

  • Link credit card transactions to the right employee
  • Crackdown on overspending
  • Maintain business-wide cashflows
  • Maximize efficiency

With Pluto, you can easily filter through various expenses, check which expenses are still pending, and see the details of that particular spending team-wide.

Increased Flexibility

Corporate cards also provide businesses with the flexibility to take the approach that suits their needs. For instance, your business may assign corporate cards only to key employees and management or traveling employees.

Workers who make only occasional purchases can use Pluto virtual or pre-loaded cards with one-time or limited spend codes.

Ultimately: More Control

Aside from these perks, company credit cards allow you to maximize your data collection and improve your analytics.

You can use this information to curb unnecessary spending, generate insights, and even negotiate better rates with vendors.

But without a proper corporate card management program in place, it’s all too easy for the system to turn upside-down.

What is Corporate Card Management, and Why is it Important?

A corporate card management platform allows business leaders to proactively wrangle company expenditure concerns from multiple fronts.

But to keep everything running smoothly, you also need a well-designed corporate card policy that ensures you are not limiting employees in their work while you are tracking the expenses.

Using corporate cards for operational expenses allows your team to work more efficiently—no more complicated approval processes when buying an online subscription or plane tickets.

But to achieve the balance between flexibility and control, you must have a corporate card management policy. Good corporate card programs:

  • Outline rules for use, such as where and how much employees may spend.
  • Capitalize on issuer-provided controls to set spending limits.
  • Monitor and analyze employee cash flow to minimize inefficiencies.
  • Are quick to catch or counteract employee or outside fraud.
  • Simplify real-time expense reporting.
  • Save time and money by reducing or eliminating physical paperwork.

Above all, a responsible management program frees up resources, putting money back on your balance sheet.

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Best Practices for Efficient Corporate Credit Card Management

The key to managing corporate cards successfully is setting expectations, communicating responsibilities, and setting controls for employee and employer accountability.

Whether you set card limits, lock and unlock cards, issue virtual cards, or code and track expenditures daily is up to you.

Just as long as you design a system that balances control and comfort.

Set Up a Corporate Card Policy

Your company policy should:

  • Set expectations and communicate cardholder responsibilities
  • Lay out eligibility requirements to receive a card
  • Set spend limits for teams, departments, or specific expenditures
  • Outline the process for submitting receipts
  • Establish clear review and penalty processes for violating these rules

Written properly, your policy should ensure everyone understands their rights and responsibilities. 

Decide Which Employees Will Get Cards

One of the most important components of managing your corporate cards is deciding who receives them.

At first, you may want to stick with assigning cards to upper-level management or department heads. But as your business grows, you may enact policies to permit other employees to receive cards conditionally or permanently, such as your sales team.

Ensuring your cards are in the right hands for the right reasons gives your employees a sense of flexibility and responsibility.

Consider Virtual Cards

You might consider issuing virtual cards when an employee may need one-time or limited access to a corporate card.

With Pluto, you can issue unlimited virtual cards in a matter of minutes and set spending limits as needed.

So the time from the employee request to delivering the virtual card credentials is minimal.

Set Budgets for Each Team and Department

Clear budgets take the guesswork out of reconciling your expenses and provide a “pool” of funds for teams to pull from.

These controls can help curb spending while still providing the funds your business needs to succeed.

Separate Personal and Corporate Expenses

When you design your budgets, it’s crucial to ensure employees know what constitutes a business expense and what doesn’t.

For instance, some companies provide generous food allotments for traveling employees, while others limit corporate card spending to hotel and transportation expenses. In this instance, employees purchasing their own meals would qualify as a personal expense.

You also want to clarify that employees can’t use their company cards for personal expenses that don’t relate to business. Even if they plan to repay you, it must be clear that the corporate card can not be used for these matters.

Have Limits on Cards and Spending Categories

Another way to crack down on corporate card expenses is by setting limits. With Pluto you can set limits when creating a new card, or adjust the limits on the go. 

Review these limits regularly to make sure that everyone has limits that are sufficient to support them in their work. 

Make Expense Reporting Simple

The card expense reporting process shouldn’t take you hours. Submitting an expense in Pluto is a matter of just a couple of clicks.

Pluto card expense submission

Drag and drop the receipt into Pluto, add a couple of details and that is it. This efficiency ensures that employees submit all their expenses on time. 

Document Every Purchase – Digitize Receipt Management

When it comes to your expense policy, your corporate credit card statement isn’t reliable enough.

Mandating receipt uploads means that you can verify the accuracy of each transaction for internal and tax-related purposes.

But in the modern world, many vendors are moving away from physical receipts that tear, smudge, or blow away in the wind.

For these instances, consider setting up a corporate email address to provide all-digital vendors.

And for expenses that do generate physical receipts - Pluto allows you to simply take a picture of the receipt with your phone and upload it to the expense management system!

Monitor Employee Spending Habits

One enormous benefit of corporate cards is the sheer transparency involved.

Every transaction is recorded and automatically categorized, allowing you to monitor corporate card expenses using credit card statements. You can also use this information to identify overindulgent employees and limit any unscrupulous spending habits.

But don’t just wait for the statements to show up monthly. Pluto allows you to proactively set alerts, notifications, and monitor transaction activity, helping you catch problems before they snowball, such as “double-dipping.” (Submitting the same expense twice, by mistake or intent.)

Analyze Expense Reports Regularly

Another facet of corporate card expense reporting is regularly analyzing your reports.

With Pluto, businesses can sort expenditures by vendor, department, employee, or internal expense codes.

Sorting and analyzing your expense reports ensures that even if you have dozens of cards floating around, you can readily monitor and manage the ins and outs.

Integrate with Your Accounting Software

The best way to unlock your corporate cards’ potential is by integrating expense software with your accounting software.

Doing so feeds each corporate credit card expense right into your accounting log, saving hundreds of hours entering, verifying, and double-checking that your corporate card statements match actual business expenses.

Pluto allows you to integrate with all major accounting software.

Key Takeaways

  • Efficient corporate card management requires you to use a platform that will allow you to have complete spend control and flexibility.
  • This is where Pluto comes in – our platform provides you with all the features and tools necessary to fully manage your corporate card spending.
  • A corporate card usage policy is another critical element to keeping spending under control – by setting clear guidelines on what can and cannot be purchased with corporate cards, you can avoid unnecessary expenses.
  • Finally, effective communication and training for employees will ensure that everyone is on the same page when it comes to using corporate cards responsibly.

 

Corporate Cards FAQs 

What is a Corporate Card Program?

A corporate card program issues cards to – and establishes rules for – employees who make purchases for a business.

These purchases can range from buying office supplies to airline tickets. Corporate card programs set guidelines for who can use a card, their spend allowance, and the expense reporting process, among other facets.

What is the Advantage of a Corporate Card?

Corporate credit cards offer multiple advantages, including:

  • Eliminating cumbersome reimbursement programs
  • Centralizing your expense management system
  • Integrating expense tracking features to simplify taxes
  • Restricting employee spend based on spend limits, vendors, or products
  • Reducing potential delays in the reconciliation process

Plus, many corporate cards connect to accounting software to allow businesses to slash time and hours wasted on expense report management.

What is Corporate Card Expense Management?

Expense management refers to the systems that organizations use to track, review, and pay for business and employee expenses.

Keeping expense management processes tightly controlled ensures that businesses can reconcile their balance sheets.

These expenses include any purchases an employee makes to improve the business, from office supplies to business travel costs.

Often, modern expense reports reflect tons of digital items too, like subscriptions and cloud space.

What is Corporate Card Reconciliation?

The corporate card reconciliation process verifies that corporate card statements match a company’s general ledger.

Businesses rely on these processes to validate transactions, keep expenses reasonable, and prevent fraud. (Not to mention, reconciling the books is essential - come tax time.)

With reports that Pluto generates, the work is minimal. You issue corporate cards, put limits on them, and all the receipts and transactions are stored in the Reimbursement report.

Who is Responsible for a Company Credit Card?

From a legal and liability standpoint, employers and businesses are responsible for all expenses charged to a corporate credit card.

That said, businesses may outline use cases in which an employee is responsible for repaying their own charges, such as when they make personal purchases on their employer’s dime.

5
All
Guides
November 9, 2023

Mohammed Ridwan

Corporate P-Cards: How to Use Them for Maximum Advantage

P-cards can replace your corporate credit cards. 

If you rely on credit cards, you would have 2-3 cards issued to the executives, which are shared with the employees. Though it seems a great method to ensure approval and budget control, it has many loopholes.

The finance teams are running after employees for receipts, employees are waiting on OTPs and approvals, and the CFO is not satisfied with the numbers.

You look for alternatives and land on p-cards. 

P-cards (or purchase cards) are corporate cards you issue to your employees for business expenses. Then, be it purchasing a SaaS or making vendor payments, employees use it for all work-related spending. 

See a Demo

What are Corporate P cards?

Corporate P cards are company purchase cards that employees can use to make business purchases without going through the traditional purchase request and approval process. Corporate P cards make it easy for companies to manage account payables & automate expense accounting while staying in complete control of their spending.

What Is the Difference Between a Credit Card and a P-Card? 

While both cards are used exclusively for business expenses, there are many differences.

Credit cards make expense management difficult, with no visibility into where the money is going. An executive shares a single card with their team, creating a chaotic financial situation. 

The card owner struggles to manage a constant stream of payment requests. Employees are left hanging with delayed payments, waiting for approvals. Especially in bigger companies, finance teams struggle with reconciliation and zombie spending (which is when a company continues to pay for something that isn’t used anymore, or when it pays for services that former employees had used).  

On the flip side, if you use p-cards, you can issue each employee a separate card for corporate expenses. Each card has a specific budget and restrictions to ensure control and facilitate approval without delays. 

For instance, you issue a card with a $500 monthly limit, restricted to office supply vendors like "Office One."

In this way, you manage budget control and approvals without losing visibility or having to micromanage. 

How can Businesses use Corporate P Cards for Employee Expenses?

Moving from a credit card to a P-card isn’t complicated. Here is a step-by-step process of how you can provide your employees p cards and start using them:

Step 1: Generate Corporate Cards

The first step is to choose the type of card you want for your employees: physical or virtual. While a virtual card can be set up in under a minute, a physical card takes about 2-3 days to get delivered.

generate corporate card

Physical cards work well for those who travel or have on-site jobs, making petty cash management easy. Contrarily, virtual cards support secure online purchases, such as buying SaaS tools or paying for digital advertising campaigns.

Once you decide whom to give a card and what type, set the budget and policies. You can incorporate the following policies to customize the cards:

  • Specify the budget and replenishment frequency of the budget on the card- daily, monthly, or yearly.
  • Define the purpose of cards by enabling only specific general ledgers (GL), labels, and tax codes.
  • Switch on/off the ATM withdrawal option.
  • Enable auto-lock for cards in case of receipt policy violation, where if the receipt isn’t attached in 7 days, the card is frozen. 
corporate purchase cards

All these customization options offer you better control without having to chase employees later. Deciding the budget, frequency, and vendors ensures that the card is used rightfully. 

For instance, you would switch off ATM withdrawal for virtual cards that are meant for buying SaaS tools. Likewise, you can establish a monthly replenishment schedule to maintain sufficient funds while preventing excess spending.   

Apart from this method, your employees can also request to activate the P-cards. They explain the card's purpose, after which the admin can approve/reject the request. 

customize corporate p cards

Now that the employees have cards in their hands, let’s see how you can better manage corporate spending with them. 

Step 2: Manage Expenses Via Centralized Dashboard

Every expense on the corporate p-card is visible in real time on a centralized transactions dashboard. You get key information such as merchant name, expense category, card information, amount, and approval status.

corporate p cards for expense management

Along with this dashboard, you get a dedicated tab for each expense where all its information is available. 

You can review the key information such as receipt, department, merchant, date/time, expense category, etc. you can also download the receipt, approve/reject the expense, and check the activity log. 

manage corporate p cards

The activity log keeps track of all the conversations that have been happening with a particular transaction. Traditionally, companies use email and Slack, which makes communication messy. With this log, they can keep all their conversations and important information in one organized place. 

Step 3: Create Approval Workflows

Approval workflows ensure that each expense follows a defined hierarchy for approval by the right stakeholders. You can customize them depending on different amounts, departments, and other factors. 

It is a simple no-code system where you create workflows based on if-then rules.

Creating financial approval workflow

A custom approval workflow ensures timely and effective approval without having to run after dedicated team members. Each of them receives a notification as soon as the expense takes place, and they can approve it easily. 

Approvals and employee reimbursement become easy with a frictionless workflow like this. 

Step 4: Report and Reconcile Expenses

Integrating your cards with your accounting systems becomes the last step to facilitate reporting and reconciliation. 

Integrate Pluto with your ERP

Once you integrate with your accounting software, you can enjoy complete visibility and control over your corporate expenses. 

You get a dedicated insights window to track expenses and identify trends. You can add custom filters and export these for further analysis. 

Get dedicated insights

To understand the entire process better, book a demo and see how you can benefit from switching to a corporate p card. 

Why Shift From Traditional Methods to Corporate P Cards?

Credit cards seem simpler, where a bank gives a few credit cards to share among the teams. But here’s why it doesn’t work:

  • It is difficult to track who spends what, how much, and why.
  • Employees wait for OTPs and approvals, delaying payments and reimbursements.
  • The chances of zombie spending increase because the same card is shared. This also becomes one of the loopholes which leads employees to misuse the cards.
  • The admins have to chase employees for receipts during reconciliation.

While these are just a few, relying on credit cards can cause chaos in expense management. Here are some reasons corporate p-cards are a more suitable option today:

No More Shared Cards

Corporate P card

You ditch the whole system of sharing credit cards, which is the root cause of limited visibility. With corporate p cards, you can issue any employee a dedicated card for specific expenses. 

So, if you issue Rashid from the marketing department a virtual corporate card for running Ads, he can not use it otherwise. He will be accountable for any unnecessary expenses beyond the specified budget.

This means more visibility and control over corporate expenses.  

Easy Receipt Management

Receipt management with Pluto

Corporate cards make receipt management easier with OCR technology in the following ways:

  • Submitting expense reports at the end of the day becomes easier as it auto-populates all the information
  • Uploading receipts in bulk upload with OCR handling the rest makes the process faster
  • Detecting duplicate receipts becomes simpler as OCR eliminates the risk of manual errors 

Apart from OCR, you also get the option to split the transactions to make the accounting process easier. Here, for each transaction, you can split the amount into a separate category, GL account, tax code, etc. 

Split transactions with ease

For instance, a $300 expense can be split into $200 for software purchases and the remaining $100 as consulting fees. Each will have a specific category, GL account, and corresponding tax code.

Budget Control

Corporate cards give more visibility and control over finances. 

Although both credit cards and p-cards can have specific budgets, p-cards enable you to set specific policies and rules. 

For instance, you give an employee a $1,000 monthly budget but restrict them to using the card only for office supplies purchases. 

Similarly, you can set a $500 monthly limit for marketing expenses and restrict the card to "Ad Campaigns" and "Promotions," ensuring focused spending.

Another benefit is to assign monthly, yearly, and weekly budgets.

For instance, you can allocate an annual budget of $500,000 for the marketing department but assign a weekly budget of $10,000 for ad campaigns. 

This facilitates flexibility for the teams to function better and gives the finance team more control over resource planning and allocation.

WhatsApp Integration

Integrate with Whatsapp

Receipt uploading becomes simpler when all you have to do is click a picture on WhatsApp and hit send. 

After each transaction, employees get a notification to upload the receipts via WhatsApp. With this simple integration, receipt capturing becomes simple and fast. 

Not only is the receipt captured, but stored under the relevant transaction tab with all its information intact. OCR makes it easier to extract key details and populate expense reports. 

Admins can approve these expenses, and reconciliation becomes a breeze. 

Eliminate Corporate Card Fraud

P-cards give you more control and security. From setting custom policies to raising alerts in case of duplicate receipts, p-cards ensure that employees don’t misuse the cards.

Additionally, the custom approvals workflows and dedicated activity logs reduce the chances of oversight. This system helps prevent unauthorized spending. 

For instance, an employee tries to use the card for a personal expense, like an expensive dinner. 

The custom approval setup will alert the admins. The active activity log with documented conversations will further ensure that no personal expense is charged on corporate cards. 

Get the Most Out of Your Corporate Cards 

Transitioning from credit cards to corporate p cards can be an exciting move. But to make the most of it:

  • Set an expense policy outlining the guidelines that will govern the corporate cards. This practice will also become the pillar for a healthier financial environment to support internal control over financial reporting (ICFR) efforts.
  • Understand the hierarchies in the company to create approval workflows accordingly. Find a balance between control and micromanagement. Managers should be informed about expenses without being excessively involved in them. 

Do this right, and you will have better visibility and control over your finances. The employees will not be left hanging for approvals. The finance team will be at peace, and the CFO will have more faith in the numbers.

5
All
Guides
December 1, 2023

Mohammed Ridwan

What is Account Reconciliation? Basics for UAE-Based Companies

Last day of the fiscal year, and you are closing the books. One of the employees writes a check for 50000 AED to a vendor. The internal records show a payment of 50000 AED, but your balance will not match your bank statement due to the time difference in check clearing. 

Account reconciliation addresses these differences and mismatches of records. It helps you identify any gaps in your accounting statement to make adjustments and ensure accuracy. 

In this post, we will discuss account reconciliation and how you can ensure compliance with proper reporting.

What is Account Reconciliation?

Account reconciliation involves comparing your internal financial statements to external and third-party sources, such as bank statements, to ensure the accuracy of financial records.  

What is account reconciliation

The frequency of account reconciliation will depend upon your company's internal policies and industry practices. Generally, companies conduct account reconciliations every month or quarter. 

You can also automate this process and reconcile accounts in real time. The software integrates with your accounting systems and ERPs and facilitates record-keeping. Employees directly upload receipts on the software, and all the transactions are visible on a centralized platform for real-time tracking. Then, the tool automatically categorizes the expenses into different general ledger (GL) accounts and tax codes, making reconciliation simple. 

Why Invest in Account Reconciliation?

Account reconciliation is a standard accounting process. While it seems reasonable to continue using traditional manual systems for record-keeping and reconciling, having a unified accounting platform enables you to close books 10X faster. 

Importance of account reconciliation

Imagine a single tool to manage reimbursement, petty cash, corporate cards, and end-to-end procurement. You eliminate the chances of errors and fraud with more visibility over your money. As a result, you get accurate financial statements, creating a transparent environment for stakeholders. 

How is Account Reconciliation Done?

Account reconciliation involves comparing GL account balances to supporting external sources and records. Here is a complete breakdown of the process: 

1. Identify Accounts for Reconciliation

Identify the accounts that need reconciliation. This depends on the nature of the business, industry regulations, and the company's internal processes. Common accounts include:

  • Bank accounts
  • Accounts payables and receivables
  • VAT
  • Inventory
  • Intercompany transactions
  • Revenue
  • Expenses

2. Gather Relevant Documents

Collect supporting documents for the identified accounts, such as bank statements, invoices, receipts, and other relevant financial records.

3. Verify Opening Balances

Compare the opening balances in the company's records with the corresponding balances in external statements or supporting documentation. This ensures that the starting point for reconciliation is accurate.

4. Adjust Differences

Identify discrepancies and make adjustments as needed. Based on the types of accounts chosen, you are likely to have the following discrepancies:

  1. Bank: Outstanding checks, deposits in transit, or bank fees
  2. Accounts payable and receivable: For accounts payable, mismatch between the company's records and vendor invoices. On the accounts receivable side, payments not being accurately reflected in the company's records.
  3. Value Added Tax (VAT): Errors in calculating input and output VAT, misclassification of transactions, or discrepancies between recorded and actual tax amounts
  4. Inventory: Errors in recording stock levels, theft, obsolescence, or misclassification of inventory items
  5. Intercompany: Errors in eliminating intercompany transactions, misallocating expenses, or differences in intercompany balances
  6. Revenue: Unrecorded sales, errors in invoicing, or misapplication of revenue recognition principles
  7. Expenses: Unrecorded expenses, duplicate payments, or errors in expense categorization

5. Review and Finalize

Review the reconciled accounts for accuracy and completeness. Obtain necessary approvals from management or relevant stakeholders before making adjustments and finalizing financial decisions.

Finalize the reconciliation process and document the adjustments made. Retain all relevant records for auditing purposes and future reference.

Top 5 Account Reconciliation Errors

Here are the top 5 most common errors that lead to discrepancies in account reconciliation: 

1. Omission

Omission includes missing certain transactions from the accounting records due to oversight. For instance, forgetting to record a payment received results in understating cash and accounts receivable.

Solution: Review transaction documentation, bank statements, and other supporting records to identify and record any omitted transactions.

2. Duplication

Duplication involves recording the same transaction more than once, leading to an overstatement of figures. For instance, recording a sales invoice twice causes excessive revenue figures.

Solution: Review transactions and eliminate any duplicate entries.

3. Timing Difference

Timing differences refer to situations where a transaction is recorded in the books at a different time than when it clears the bank or is recognized for accounting purposes. For instance, writing a check at the end of the month that doesn't clear the bank until the beginning of the following month.

Solution: Regularly compare bank statements with the company's records, adjusting for timing differences.

4. Fraud

Fraudulent activities involve intentionally manipulating financial records to deceive stakeholders and make personal gains. For instance, employees falsify expense receipts to inflate reimbursement claims.

Solution: Implement strong internal controls, conduct regular audits, and promote a culture of ethical behavior.

5. Misclassification

Misclassification occurs when transactions are recorded in the wrong accounts. For instance, adding a purchase of office supplies to the wrong expense account or labeling an incorrect GL code.

Solution: Review transactions to ensure proper coding and provide training to prevent misclassification errors.

Risk of Overlooking Account Reconciliation 

While account reconciliation seems a redundant task of matching accounts’ balances, small defaults can lead to operational, financial, and legal challenges.

You can face hefty fines or penalties imposed by regulatory authorities. You may also encounter disruptions due to legal investigations, audits, or even suspension of business activities. Moreover, failure to adhere to regulations can harm a company's reputation. 

In some cases, it leads to the revocation of licenses or permits, jeopardizing the company's ability to operate within the UAE. 

Here are some challenges you face when you do not pay due attention to account reconciliation: 

1. Manual Errors

The chances of errors are high if you rely on manual processes for account reconciliation. It can distort financial records, impacting decision-making and financial analysis.

Example: An employee records a sales transaction twice, leading to an inaccurate representation of the company's revenue.

2. Fraud

Detecting fraud becomes difficult when you lack real-time visibility or the accounts are not being cross-verified. As a result, fraudulent activities go undetected, causing financial losses and damaging trust.

Example: An employee manipulates expense reports to divert company funds for personal use.

3. Overdrafts

You lose sight of the funds available, leading to bounced checks or potential bank charges. This harms the company's financial stability and relationships with vendors.

Example: The employee wrote a check with insufficient funds, resulting in a bounced check and delayed vendor payment.

4. Inaccurate Reporting

You increase the chances of discrepancies in financial reports, providing stakeholders with misleading information. This undermines the confidence in the company's financial health and performance.

Example: An employee overlooking the balance between revenue and expenses leads to inaccurate profitability figures in financial statements.

5. Tax Issues

You can encounter inaccurate tax calculations or omissions, leading to tax filing errors. This leads to penalties, fines, and increased scrutiny from tax authorities.

Example: An employee's oversight of business expenses, like travel and meals, results in underreported deductions, leading to tax filing inaccuracies.

6. Affect Credit Score

You increase the chances of missed payments or errors that negatively impact the company's credit score. This further affects the ability to secure loans or favorable credit terms.

Example: An employee's oversight in paying a critical supplier invoice on time leads to late fees, strains supplier relations, and affects the company's credit score.

7. Audit Challenges

With incomplete or inaccurate reconciliations, you risk challenges during audits, demanding additional time and resources. This results in increased audit costs and potential legal implications.

Example: An employee fails to reconcile monthly bank statements, leading to missing documentation. The subsequent need for extensive audit adjustments increases audit costs and poses legal risks.

Automate For Ease 

Managing 1000s of expenses and individually categorizing and coding them is a big headache for finance teams. Leaving this to your accounting software will further require oversight during audit season, adding to the workload. Moreover, these software don’t help with record-keeping or real-time visibility, causing you to spend more on account reconciliation. 

Pluto makes this easier by bringing it all to a centralized platform. By shifting to the Pluto ecosystem, you close books 10x faster and simplify spend management. It is as simple as integrating your accounting software and ERPs and getting visibility over your money from Day one. 

Streamline your financial management with our all-in-one platform, integrating accounts payable software for comprehensive control. Manage categorization, reimbursements, corporate cards, and all aspects of accounts payable seamlessly from a unified dashboard.

The best part is that you can bulk export and import logs and even lock the transactions to avoid changes once approved. Further, with view-only access to external bookkeepers, you ensure transparency and security with no chaos during audit season. 

Reconciliation in Accounting Made Simple

Meeting compliance standards should not be an afterthought during the audit season. 

You must adopt the right processes, standards, and tools to get complete control over your accounts. This will ensure accurate records and build trust amongst stakeholders. Moreover, the teams will have a proper systems to reconcile without rushing at the end time. 

With automation, you make the process easier and more efficient. Pluto assists you with a centralized platform to automate your accounts payables and simplify account reconciliation without having to juggle multiple accounting software