Bank feeds are one of the most exciting advancements in accounting in the past few years.
This brilliant software innovation helps businesses become much more efficient by vastly reducing manual reconciliation work.
The technology allows data to flow effortlessly between bank accounts and accounting software, helping make administration invisible and saving time, so you can focus on growing revenue and profits.
This is relevant for businesses of all sizes but especially for small businesses that spend a large portion of their time on manual reconciliations.
Bank feeds are designed to automate large sections of manual bookkeeping, which helps make finance professionals much more agile and responsive to business needs.
They can also help you integrate financial data into core processes, creating dynamic, up-to-date reporting and analysis to support business decisions.
Here’s what we cover in this article:
- What are bank feeds?
- How bank feeds work
- Are bank feeds secure?
- How bank feeds make your business more efficient
- How to start using bank feeds
- Final thoughts on bank feeds
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What are bank feeds?
Bank feeds are connections that allow you to automatically download incoming and outgoing transactions from your bank account to your accounting software.
You can then work with this data by matching bank transactions to your accounting activities to help you reconcile accounts.
The feeds simplify bank reconciliation, ensuring your accounts are accurate and up to date, while vastly reducing manual data entry and saving you time.
You can also create new transactions as needed and make automated rules that track and update bank activity in your software in more detailed ways, making you much more organised and efficient.
How bank feeds work
Bank feeds are suited to all businesses looking for efficiency gains.
Your software provider may have direct data connections with your bank of choice. Or the feeds might be delivered via a third-party platform that connects directly with banks and payment providers to automate and transform transaction data, such as Yodlee.
After collecting the information, the platform connects your bank account and accounting software and feeds the data in.
To obtain data from banks, the platform aggregates it by copying the list of transactions on the screen of users’ online banking portals.
It cleans up the list, removes duplicates and sends it to your online accounting software as a feed.
Are bank feeds secure?
Bank feeds keep your data safe with industry-leading security and accurate connections to banks and payment providers.
To enable access to your bank, the third-party platform needs to store your login credentials, which it does in a highly secure system.
To protect your details, at no point does your accounting software provider have sight of your banking credentials or store them, and it can’t access them either.
After you provide these credentials, the platform logs into your banking website on your behalf, retrieves your bank statement information and transfers it to your software.
How bank feeds make your business more efficient
Before feeds were introduced, you had to type transactions from a bank statement into your accounting software manually, or upload a file manually from your online banking system.
But both of these manual processes are time consuming and error prone.
Bank feeds enable you to automate large portions of manual bookkeeping work with data flowing effortlessly and seamlessly from banks into accounting software.
This saves you time on entering and reconciling transactions, helping your business increase efficiency and productivity.
Automatically matching bank transactions with sales invoices awaiting collection or bills awaiting payment, for example, can cut hours of manual data entry required to reconcile accounts.
Adding automatic rules can make you even more efficient.
For example, you can set rules to match transactions from certain suppliers automatically – such as a credit card transaction from a rail firm, categorising it as travel.
Such rules also make your data more secure, reliable, up to date and less error prone.
By integrating data into core processes, bank feeds can help you create more timely, dynamic and future-oriented reporting and analysis to support business decisions.
They can give you greater visibility and control over your cash flow, and improve cash flow forecasting, making you better prepared to take advantage of a pending windfall or avert a cash drought.
With today’s cloud-based solutions, you can also share all this information anywhere and in real time to support better and faster decisions.
Download your free copy of Master your money and discover what you need to know about doing the accounting and bookkeeping for your small business
How to start using bank feeds
Before downloading and matching transactions in your accounting software, you need to set up your bank feeds.
Within your software, start by either selecting your bank or doing a search to see if it’s available to use. Next, follow the steps to connect your bank.
Once set up, select your required bank account and download transactions for the dates you want.
After downloading, your live bank data will appear in the transactions pane, allowing you to match transactions in your accounting software or create new ones if necessary.
There is also an auto match function that matches according to date, amount and type.
If you don’t want to see any transactions – if you’ve already reconciled them, for example – you can hide them. You can also match transactions manually, and use the find option to search from a transaction.
When you finish matching, confirm your matches.
This removes the matched transactions permanently from the feeds window, and flags the transactions as matched, so they are ready to reconcile.
You can also set up rules to make automatic postings from your bank account.
Rules can assign transactions automatically to customers, suppliers or nominal codes as they happen. This further reduces the need for manual data input and reduces reconciliation time.
You can also discard, disconnect or reconnect a feed at any time.
Final thoughts on bank feeds
Bank feeds are becoming a hugely important tool for small businesses because a large part of their accounting processes involve coding bank statements into revenue and expense categories to track sales and costs.
By automating much of this process, feeds have vastly reduced the amount of data entry in businesses with a huge impact on efficiency.
By integrating with reporting and decision-making support processes, they can also help to transform online accounting software from a record-keeping system into a provider of dynamic business analysis.
Editor’s note: This article was first published in May 2020 and has been updated for relevance.
