Bank data feeds are perhaps the most important advance in small business accounting in the last 10 years. Historically the domain of large corporates, bank data feeds are now available for even the smallest businesses and offer enormous efficiency gains for business owners and their accountants.

Yet all bank data feeds are not created equal and business owners and accountants should exercise extreme caution before using or recommending them.

IMPACT

Bank data feeds can massively improve the efficiency and accuracy of the accounting process. There is no delay waiting for bank statements to arrive – the transactions are delivered 0electronically each day. Data entry is largely eliminated as the transactions are automatically uploaded to the accounting software. Once there, many software systems can even recognise the transactions and code them automatically based on user­defined rules.

In fact bank data feeds can make the accounting process so efficient that many accountants now provide a complete bookkeeping service for their small business clients in less time, and at less cost, than it used to take them just to do the year­end clean­up work. This new capability amongst accountants is finally bringing an end to the shoebox as it enables a far more efficient accounting process without the need for the small business to change what they are doing, learn to use accounting software or even have a computer.

But all is not well in the world of bank feeds. There are two methods by which bank data feeds are provided and it is vital that accountants and business owners understand the difference between the two to avoid a cleverly disguised trap.

THE GOOD

Bank­authorised data feeds are those which occur with the permission of the bank and the account holder. In this scenario, the account holder (a small business) provides an authority to their bank to provide a copy of their transaction data to a nominated advisor (their accountant) via a third party service (such as Bankstream).

Such an authority will generally be a written form supplied by the bank data feed provider and signed by the account holders. Bank­authorised data feeds are available for a limited range of UK banks at this stage and often have a small monthly charge associated with them, levied by the data feed service.

Although new to the UK, bank­authorised data feeds are used extensively in other parts of the world and are very popular with accountants as the data is highly reliable (coming directly from the banks systems) and compliant with the relevant privacy, data protection and banking rules.

THE BAD

Unauthorised data feeds provide a quick, cheap and easy alternative to bank­authorised data feeds – and are often cunningly promoted to appear to operate with the banks’ permission. Unauthorised data feeds work by logging into a customer’s internet banking service and automatically extracting the transaction data. Because of this, the data can be collected from a wide range of banks at a very low cost.

But there is one big problem – such services require the customer to hand over their internet banking credentials to a third party (most commonly a US­based aggregator called Yodlee Inc.).

Bank customers who (even unwittingly) hand over their internet banking access details are almost always violating the terms & conditions of their account. This could leave them badly exposed should a fraud occur – whether as a result of that breach or not.

THE UGLY

By using careful wording, and sometimes featuring bank logos, many accounting software systems which use unauthorised data feeds give the user the wrong impression that the service works in conjunction with their bank.

Indeed banks will, from time to time, change their internet banking sites to frustrate, at least temporarily, data services which use customer logins to grab data without authorisation. This means that although unauthorised feeds appear easy to set up and cheap to operate, they can be unreliable and are prone to interruption and missing transaction data.

These questions of quality, consistency and, most of all, legality are causing more and more accountants to think carefully about using unauthorised data feeds – an annoying development for some of the largest online accounting systems in the country who have built software which partly rely on unauthorised bank data feeds.

Ask the hard questions first Business owners and, perhaps more importantly, their accountants should check carefully how bank data feeds work in their chosen software before using or recommending them. Whilst the power of bank data feeds is undeniable, care should be taken to ensure that the data service is authorised by the bank.

Most users and recommenders of unauthorised bank data feeds are unaware that their data feed operates outside of the bank’s permission and are unwittingly running a significant risk.

All bank data feed users should check with their accounting software provider how their data feeds work – whilst remaining aware that misinformation and misunderstanding are rife.

A BRIGHT FUTURE FOR BANK-AUTHORISED DATA FEEDS

As the range of UK banks participating in bank­authorised data feeds grows, more and more small businesses and accountants will come to enjoy the significant benefits bank data feeds provide.

With the support of banks, accountants and the providers of authorised data feeds, UK small businesses are increasingly able to focus on running their business (using up­to­date information) secure in the knowledge that the books are being correctly done automatically every day.

ABOUT BANKSTREAM

Bankstream eliminates data entry by providing accountants with bank­ authorised data feeds. Bankstream software automatically codes client transactions and integrates with popular accounting software so coded data can be used in existing practice systems.

Bankstream improves accuracy, eliminates delays and saves time.

To find out more visit www.bankstream.co.uk or call 0800 500 3084.