An Accounting Revolution
While everyone was celebrating the New Year in January a new piece of seemingly obscure banking legislation came into place in the UK which has the power to revolutionise the way that small businesses integrate technology with their banks.
Previously if a third party application like a piece of book keeping software wanted to import bank transactions instead of manually entering them there were a few alternatives. Most banks will let you download a csv file of transactions and then you could import that. Some banks had individual arrangements with software providers to allow direct access but each agreement had to be individually negotiated so many combinations of software and banks weren’t available. Lastly businesses could use a third party such as Yodlee to sit between the two however this meant providing bank logins to third parties which potentially was against the terms and conditions of the bank.
The new legislation however seeks to sweep away these restrictions. The 9 biggest banks must now give access to authorised third parties through an “API”. This means transactions can be read (and potentially updated) by third party applications. This isn’t just book keeping software. This is going to mean an explosion in “Fintech” products that access bank accounts directly. Yolt is an early example of this in the consumer area.
What Does This All Mean in Practice?
What does this mean in practice for small business and accountants. Well in short it means that live bank feeds are now not really optional! Every small business should be using live bank feeds in their book keeping software. This not only speeds things up but reduces errors as well.
In the future apps will be able to not just read transactions but make payments as well. So there will be a time soon where software rules will be able to set. An example might be: “If the bank balance is above £5,000 pay outstanding supplier invoices in date order”. Automation is coming whether we like it or not!
PS. The banks that are legislated to do this are: Barclays plc, Lloyds Banking Group plc, Santander, Danske, HSBC, RBS, Bank of Ireland, Nationwide, AIBG. Interestingly Clydesdale is not on this list who we have a number of clients with!