Credit card reconciliation! The unknown Problem
Not many credit card acquirers are aware of the fact that their customers might have a problem with the reconciliation of their transactions. Very few acquirers offer a decent solution that really helps the merchant to get control of his financial flows. A lot of acquirers actually do think they have a valuable solution and offer some transaction files that can be downloaded electronically. But usually merchants are not happy with this. A lot of time crucial data is missing in these files.
Since we have a lot of customers (merchants) we help getting their credit card transactions reconciled, we can tell you what a merchant wants: The merchant wants to reconcile his sales with the payments to the bank. Simple and easy. But in the case of credit cards it is not that simple and easy. To build a relation or match-criteria between sales data and bank payments you need the data of the acquirer. Therefore acquirers offer files like EPA (electronic payment advice) or likewise. But no acquirer thinks of having match criteria embedded into this data. Therefore most of these files are worthless.
The merchants' nightmare
Bigger merchants usually have several acquirers. They need to load several files in different formats with different security mechanisms from different locations. That’s where the nightmare starts. And even if only a few acquirers are involved, finding the relation of a sales transaction and a bank payment is still a time consuming task that sometimes even includes the manual checking of all paper receipts of a cash register on a praticular day. The cost for the merchant to operate such a process is gigantic.
We can highly recommend to any acquirer to build a good transaction database for merchants and give them easy access to this data. That way, if a large merchant incorporates this data feed into his ERP systems, the merchant is hocked to the acquirer and a long and good relationship between them is almost guaranteed.
Please leave your comment here. Or if you are a big merchant, an acquirer or a PSP feel free to contact us to get more information about our reconciliation solutions. Also, we do have solutions for small to midsize merchants who want to speed up and simplify their reconciliation process and stay independent from the acquirer.
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Comment by John Vasili |
Martin , Daniel – Nice Blog, Reconciliation is also an issue for corporations that have issued pcard , corporate cards and T&E cards to employees, not enough merchants are level 3 enabled and cost distribution coding at line level is required to feed back in to the corporates ERP & Ledgers.
Take a look at http://www.invapay.com where all merchants are level 3 enabled and every transaction is coded or split coded at line level. @invapay
Comment by Clive Williams |
Hi Daniel; thank you for your good article. Could I ask, what exactly do you mean by the term “match criteria” – I can kind of guess that you want to match 2 pieces of data or value and this “match criteria” would assist, but how exactly? Kind regards, Clive
Comment by Daniel Eckstein |
Hi Clive
Lets look at an example: You usually do a lot of credit card sales during shopping hours (lets say USD 1 Mio in total). The next day you will be reimbursed by the acquirer in total (all sales of yesterday). There is also a commission fee deducted from the total amount. Though you will receive something like USD 995’000 in your bank account. Now if you think you have several hundred stores than it is basically impossible to find out which transaction are included in your reimbursement.
To built a link between your sales data and your reimbursement form the acquirer you need a transaction file from the acquirer (a common name is EPA which stands for “electronic payment advice”). In these EPA files you usually have some matching criterias like a transaction counter, authorization code, etc. that can be matched against your sales data. The EPA file usually also contains a matching id that you will find on your credit note of your bank (reimbursement id). Now you are able to match your reimbursement (USD 995’000) with a transaction file (electronic payment advice) from your acquirer. There you will find all transactions that are included in this EPA File (USD 1 Mio.). Now you can match them against your sales data and you can reconcile all sales transaction.
One other benefit is, since the EPA Files also contain the commission amount, you are able you fully automate the book keeping process. First you reconcile all transactions, than you group or aggregate the transactions according you company structure (cost centers) and transfer them electronically into your accounting system.
Our solution Reconciliation Hub Enterprise does exactly this job and is designed for enterprise customers such a airlines, large retailers, public transport, etc. We do serve several large customers, brands you will see every day while shopping.
Hope that explains a little more.
Daniel