Corporate cash flow departments need to be continuously updated, in a form which is reliable, about their real liquidity situation. Moreover, they need to know whether the current status of their accounting records is actually accurate, and for this purpose they need their banks to regularly inform them about the balances and activity in their accounts.
This process is carried out by sending and receiving bank statements which are usually executed automatically through SWIFT and P2P networks between the company’s business management system (its ERP) and the bank. Today, this communication is essential for companies to ensure the integrity of their cash flow information.
What are bank statements?
The bank statement is a bank document that reflects both the balance and the list of transactions that a bank account has had over a certain period of time. In companies that have a bank statement receipt system in place, this information is usually received the next morning and contains all the data from the previous day.
Bank statements have enough information to know the type of transaction that has been carried out. The bank statement will have at least the following details:
- The transaction date: the date on which the bank account was debited or credited and when the bank recorded the transaction.
- Transaction value date: this is the date on which the transaction actually becomes effective, and is not necessarily the same as the transaction date. For transfers, for example, the value date will be the time when your recipient can use the money.
- Transaction concept: indicates whether the movement is positive or negative, and the type of transaction performed. This field contains all the relevant information about the flow, for example, if it has been made for the payment of an invoice, if it is the collection of any 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 negative amounts and adding positive amounts.
Bank reconciliation: Why is it so important to receive information from statements?
For self-employed individuals and companies, bank statements are a way of verifying that transactions are actually accounted for in their management systems and that there are no errors.
This process is known as bank reconciliation, and is typically automated in ERP systems. Using the bank statement on the one hand and the company’s accounting information on the other, you can easily compare notes and detect if there has been any error or duplication. Bank reconciliation also allows us to identify if the bank has applied any additional expense in any of the bank movements, to recognize it and to account for it.
It has the following advantages:
- It helps to quickly detect errors. The bank statement is the most reliable information about the company’s cash flow, because it shows all the transactions in one or more bank accounts. It is easy to identify if there is any missing information or if there is any incorrect data.
- It confirms whether collections and payments have taken place. All company cash flow information is reflected in the statements, so we can confirm if a particular business transaction has already been paid for by a customer or paid to a supplier.
- It helps identify fees and other expenses associated with bank accounts. The statements include this type of transaction, so it is easy to know if a certain account has an expense or fee associated with it that we were not aware of.
The main rules of bank statements
Normally, both the process of receiving statements and their subsequent bank reconciliation are carried out automatically and periodically through ERPs, following standards predefined by the main banking associations, depending on the bank and whether the entity is national or foreign. The main standards used in Spain for the reception of extracts are AEB 43 and MT940.
AEB 43
Standard 43 (or AEB 43) is a banking standard for the receipt of statements defined by the Spanish Banking Association (AEB). It only applies to Spanish entities.
It is a file structured in several records where each of the transactions made in one or more current accounts are set out; the accounts always belong to the same entity.
MT940
The MT940 format is an international standard for receiving bank statements in electronic format. It is the format used, among others, by countries belonging to the SEPA area.
Like AEB 43, MT940 contains transaction information for all bank accounts belonging to the same entity. It also makes some additional checks, such as that the statement number appears consecutively to that of the previous day and that the initial balance of that day’s statement is equal to the final balance of the previous day’s statement.
Cash flow APIs as a solution for integrating bank statements
Current statement receipt models send information to ERP periodically, usually once a day. As a result, bank reconciliation must also be performed once a day. Because of this situation, companies’ cash flow departments do not have an up-to-date picture of their liquidity situation. They have to wait the next day to find out if their cash flow positions are real or not.
Treasure management APIs solve these kinds of problem. The cash flow managers can download their company’s accounts statement with the balances and transactions for the predefined period, in real time and with an automatic connection with the ERP so that ERP, in turn, can deal with carrying out the bank reconciliation. In this way, they have a real picture of their cash flow situation at all times to make decisions.
APIs also provide simple and accessible solutions, because they have a simple infrastructure with all the necessary specifications to develop the applications. In this way, ERP can integrate banking information with tailor-made and much less complex developments, saving implementation costs. Many types of company can use this solution, from large corporations to smaller SMEs.
In short, the APIs can be used to simplify the process of receiving statements and integrating them with the ERP for other cash flow-related processes. One of them is the BBVA Business Accounts API, which allows you to automatically integrate into your company’s systems, the account statement of the accounts you have associated with your BBVA Net Cash, using the market’s AEB43 standard format.
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