Banking communication is one of the most important processes within any company’s treasury department. Companies need to be in constant contact with financial entities to know the status of their bank accounts so they can make important decisions affecting their liquidity forecast.
In Spain, one of the most important banking rules is Rulebook 43 (or simply Standard 43), a communication standard that makes it possible to automate such an important process as bank reconciliation.
Using this standard may become a reality through the opening of banking APIs, which make it easier for most companies, whether SMEs or large corporations, to adopt it by promoting the integration of bank statements and the automation of certain accounting processes affecting cash flow.
What is Standard 43
Standard 43 is a banking standard that regulates and standardizes sending current account bank statements. It was developed by Spanish credit institutions through their respective associations, with special participation of the Spanish Banking Association (AEB). It serves, to a greater extent, to facilitate an accounting process as critical and important as bank reconciliation, that is, comparing the information of a company’s bank accounts with its accounting, in order to detect outstanding charges or credits and, in general, to find out the actual status of its cash flow.
Banks usually send these files daily to companies that have contracted this service through P2P networks, usually in the early hours of the morning. Once received, business systems integrate all this activity into their systems and execute bank reconciliation automatically. In addition, entities allow this standard to be downloaded manually.
This Rulebook is available to all types of companies, whether SMEs or large companies. However, in practice, only companies of a certain entity adopt it due to the complexity of its implementation and its costly maintenance, especially if you want to automate this process.
Structure of Standard 43
From a technical point of view, Rulebook 43 is a file that has a defined structure where each and every entry (charges and credits) of a company’s bank accounts is reflected over a given time interval. Although each entity can structure this file differently, in most cases it consists of several types of records: starting balance, entries, and end balance.
To validate the information, it is verified that the initial balance of a day’s statement matches the final balance of the previous day and that the sum of all entries results in the difference between the starting and end balances for that day.
Standard 43 is structured into different blocks that identify all records. Consisting of:
- The header, where the bank sending the information and the date of the statement is reported.
- Each bank account that the customer has open at that bank will open a new block, which will contain the information about the starting balance.
- Within each account, there will be as many secondary blocks as entries have been recorded. Entries will identify charges (with a negative sign) or credits (with a positive sign) in the bank account. For example, a transfer received will result in a positive entry, while a cash withdrawal will be posted as a negative entry. Each entry type will be identified by a set of codes that identify each transaction, which are usually dependent on each bank. In addition, the statement will provide additional information to identify the transaction being referenced (payment of an invoice, payment of a fee, etc.)
- End of account, where all the information in the file is summarized, detailing the number of total entries sent, as well as the end balance.
Advantages of using Standard 43
Electronic account statements play an important role within companies’ treasury departments. More specifically, Standard 43 facilitates more agile communication with financial institutions, while automating bank reconciliation, which is one of the most important cash flow processes.
In addition, through Standard 43, companies can identify which payments have been made and those that are pending, such as taxes or payroll, in addition to the outcome of the collections. The goal is for companies to be able to make liquidity decisions based on that data.
Drawbacks of standard 43
Despite the importance of Standard 43, it also has a number of drawbacks. The most important of these is its lack of immediacy. Companies only find out the current status of their accounts once a day, but cannot access their information in real time unless they download it manually.
This can be a problem for some companies whose activity entails they need to be immediately aware of the actual status of their cash flow, especially in businesses with continuous flows of collections and payments. Those parties responsible for cash flow are forced to wait until the following day to find out this information, which may have little to do with its actual status. Their decisions are based on relatively outdated information, which can impair its use and the liquidity forecast.
In addition, in many cases, the implementation of Standard 43 in enterprise management systems is complex and costly. It involves establishing a communication protocol between the bank and the company over P2P networks, and not all companies can afford this dedicated connection. That is why, in practice, this standard has not yet had the favorable welcome it warrants within Spanish companies.
APIs as a method to offset the drawbacks of Standard 43
Open banking has made is possible to mitigate some of the main problems of implementing Standard 43. By using banking APIs, companies can obtain their bank statements in a simple, agile and secure way and integrate them into their business systems automatically.
The BBVA Business Accounts API facilitates this integration. This API allows you to see your banking activity in AEB43 format and keep your cash flow updated and cross-checked against your actual banking status, at the exact time you need it. In addition, you will also be able to automatically integrate the statement of your BBVA accounts in AEB43 format into your company’s systems and directly access this information unaided whenever you need it.
In this way, the company’s cash flow is improved, and better decisions can be made based on real-time information.