Bank statements: What are they and how to manage them in a company?

Company treasury departments need constant and reliable updating of their real liquidity situation to manage the company’s expenses. For this it is essential to request and receive bank statements.

This process is carried out by sending and receiving bank account statements, generally executed automatically through SWIFT and P2P networks between the company’s enterprise resource planning (ERP) system and the bank.

What is a bank statement and what is its purpose?

A bank statement is a bank document that reflects both the balance and the list of movements that a bank account has had at a given moment in time. In companies that have implemented a system for receiving statements, this information is normally received the next morning and includes all the data up to the previous day, making it an essential element in the management of a business’s expenses and finances.

What information do bank statements contain?

Bank statements provide enough information to indicate what type of transaction has been made. There are a multitude of financial solutions that take into account bank data to improve business management. The data shown in the statement includes, at least, the following:

• Transaction date: this is the date on which the corresponding debit or credit was made to the bank account and when the bank recorded the transaction.
• Transaction value date: different from the transaction date, this is the date on which the movement actually takes effect, which does not have to coincide with the transaction date. For example, in the case of transfers, the value date will be the moment in which the recipient can use the money.
• Transaction description: indicates whether the movement is positive or negative and the type of transaction performed. This field contains all the relevant information about the transaction, for example, if it has been made for the payment of an invoice, if it is the collection of a fee, etc.
• Transaction amount: the amount of the transaction in the currency in which the account is denominated.
• Available Balance: The balance of the account after deducting the negative amounts and adding the positive amounts.

Types of bank statement

There are several types of bank statement tailored to the financial needs of both individuals and businesses. The main ones are shown below:

• Savings or current account statement: this is the most common type of statement and is used by companies because it allows effective control of cash flow. It provides a detailed summary of all transactions made on the account, including deposits, cash withdrawals, transfers and service charges. 
• Investment Fund Statement: provides a summary of the investments made, including the fund’s performance, share purchase and sale transactions, and any gains or losses made. These statements allow you to monitor and evaluate the performance of investments over time.
• Credit card statements: These statements detail all transactions made with the card during a specific period, including purchases, payments, interest and additional fees. They help credit card users track their spending, manage their debt and detect any unauthorised transactions.

Why are bank statements important in the management of a company’s expenses?

For self-employed workers and businesses, bank statements are a way of verifying that transactions are recorded in their cash management systems and that there are no errors. 

This process is known as bank reconciliation, and it is usually automated in ERP systems. With the bank statement on one side and the information from the company’s accounts on the other side, it is easy to compare the entries and detect if there have been any errors or duplicates. For the treasury management of a business, bank reconciliation has the following advantages:

• It helps to detect errors quickly: The bank statement has the most reliable information on the company’s treasury, because it reflects all the movements of one or more bank accounts.
• Control and prevent fraud:  Bank statements allow businesses to regularly review all transactions made and detect any suspicious or unauthorised activity, as well as bank errors. This helps to identify fraud and take preventive measures.
• Financial and budgetary planning: By having a detailed record of all financial movements, companies can analyse their spending and income patterns, which allows them to make more accurate financial projections and establish budgets that are more in line with reality.

How can a company improve its banking and financial management through the use of APIs?

Cash management APIs solve the main problems of current models for receiving statements by providing real-time integration with ERP systems, automating process, improving security, and performing deeper analyses. These technologies make it possible to streamline bank reconciliation and optimise cash management in several ways:

• ERP integration: APIs allow direct, real-time integration of bank statements with ERP systems, removing the need to wait for daily data updates. This provides companies with an up-to-date and accurate picture of their liquidity situation at any time.
• Process automation: With the use of APIs, many manual tasks are automated, reducing human error and saving time. Automation makes it easier to track and manage financial transactions.
• Improved security: APIs ensure that data is transmitted in a secure and encrypted manner, reducing the risk of fraud and unauthorised access. In addition, they allow for the implementation of additional controls and continuous monitoring of transactions.

• More prevention and control: By integrating real-time data, APIs enable more detailed and accurate analysis. Companies can use these capabilities to spot patterns, forecast trends and make strategic decisions based on hard data.

APIs provide simple and affordable solutions that can be leveraged by all types of businesses, from large corporations to the smallest SMEs. APIs such as Reconciliation allow you to access bank account movements and their information immediately, and to trade and automate shares, without leaving your internal management system or ERP.

 The main rules for bank statements

Normally, both the process of receiving statements and their subsequent bank reconciliation is carried out automatically and periodically through the ERPs, following standards predefined legally. The main standards used in Spain for the receipt of statements are AEB 43 and MT940.

How does Standard 43 affect bank statements?

Standard 43, also known as C43 or AEB 43, is a banking standard for receiving statements defined by the Spanish Banking Association (AEB). It is only applicable to Spanish entities.

It is a file structured with several records where each of the movements made in one or more current accounts, always belonging to the same institution, are shown.

What is the MT940 format used for?

The MT940 format is an international account statement reporting standard for receiving bank statements in electronic format. It is the format used internationally by banks to communicate information about transactions in their customers’ accounts. 

Like AEB 43, MT940 contains the information on movements in all bank accounts belonging to one institution. It also performs some additional checks, such as ensuring that the statement number is sequential with that of the previous day and that the beginning balance of that day’s statement is equal to the ending balance of the previous day’s statement.

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