The day-to-day business of any company is defined by its relationship with banks. Communication flows constantly in both directions and the large amount of information exchanged daily accentuates the need to automate these processes as much as possible.
Banking APIs are the perfect tool to achieve this. Thanks to the features they offer, they provide access to information on the balance and movements of each bank account in real time, allowing a process as important as bank reconciliation to be carried out. This process is essential for every company.
What is the reconciliation of bank accounts?
Companies have to compare their cash flow data against those of the bank, which, after all, holds the relevant information involving the company’s liquidity statements. To do this, ERPs perform a periodic process known as bank reconciliation, which seeks to collect information on banking transactions and compare them against the company’s records. This process can identify, among other things, any errors or duplicate entries and if the collections and payments have been settled correctly.
Usually, bank reconciliation is done in the company’s ERP, once the information is received from the bank statements, usually via SWIFT channels. The bank sends the information on the daily statements using a standard that, in Spain, is known as format 43 (also AEB43), and internationally as format MT940. Every day, these standards send all the information on the movements and balance of the accounts that the company has open in the bank so the ERP can interpret them and automatically reconcile the accounts.
This is an essential accounting process for the cash management of companies, which can, by using this method, determine the actual status of their accounts and thus make their cash flow forecasts to release orders, review the current balance of the company’s treasury and identify unforeseen expenses, fees, etc., and report them to accounting.
After all, the purpose of the reconciliation is the same for companies as it is for any of us when we check our personal banking information: to see if scheduled operations – such as bill payments and paycheck deposits – were executed correctly, to flag unexpected fees and to check the balance to see if we can afford a certain purchase or not.
APIs as a method of banking communication and receiving statements
APIs facilitate the process of receiving statements and integrating them into the company’s ERP. Thanks to its specifications, any fintech company or a third party can develop a custom application that communicates with the bank to retrieve the statements for a certain bank account, integrate them into the company’s ERP and perform the bank reconciliation to verify all the banking transactions.
As a result, the accountants have at their disposal information on the company’s accounts in their systems whenever they need it. They can also consult all the information relating to their collections and payments, which allows the company to automate its processes so its employees can focus their work on what really matters.
One of the APIs that expedite this communication is Business Accounts by BBVA, which allows companies to automatically integrate the statements for the accounts they have associated with BBVA Net Cash into their company’s systems using the standard AEB43 market format.
Why APIs are the ideal tool for doing bank reconciliation
Using APIs offers advantages over other processes and implementations. They provide a way to save costs, they enhance security and, of course, they allow information to flow more continuously and on demand.
In banking communications, there is usually an intermediate company or service that is responsible for implementing all the infrastructure needed to guarantee communications. At the moment, this information flow is carried out using SWIFT interfaces, which is the normal method used to make collections and payments, as well as to receive statements.
This type of dedicated connection is not free from errors. A system crash when the information is being received, lost data or poorly implemented software can cause the information to contain errors or be delayed, which can jeopardize the integrity and security of the communication.
APIs eliminate the need for dedicated channels to carry this information, and the connection between the bank and the company is made directly, with no intermediaries and on demand. The result is fewer or no errors, and the reconciliation can also be carried out without errors.
In real time
SWIFT channels allow for the direct and on-demand exchange of all information on collections and payments for the bank to execute involving the corresponding bank accounts. However, in the case of statements, the information is received once a day with the movements from the previous day, which provides a delayed picture of the current cash situation.
APIs save this problem. Cash flow inquiries can be made on demand, not just once a day, since these specifications allow accessing the information in real time. As a result, accountants have much more up-to-date information on their company’s cash flowsand they can make decisions based on much more current and instantaneous information.
For any type of company and activity
Generally, SWIFT channels are implemented only for large companies, due to the infrastructure that has to be installed. Consequently, most SMEs are required to do this work manually, which puts their information at risk and entails higher costs, since they have to devote at least one resource to doing this important task.
APIs solve this problem by making the process much faster and cheaper. In fact, they eliminate the need for a large infrastructure, since communication with the bank is direct, and they have all the specifications necessary to guarantee this communication. In short, APIs are tools that provide much more accessible solutions for SMEs.
For all these reasons, cash management APIs have become the ideal tool for managing a company’s accounting, especially all those aspects related to cash flow.