One of the hot-button topics in cloud accounting software has been the security and accuracy of bank feeds. Bank feeds are either occasionally unreliable or practically perfect depending on who you talk to.
But after several changes of heart with the main players I think the debate can finally be laid to rest.
Undisputedly a great improvement, the automatic downloading of bank transactions received flak from several quarters mainly due to questions over a third-party supplier, Yodlee. Yodlee provides bank feeds to Xero (allegedly a small percentage), Saasu and the upcoming Reckon One.
Yodlee’s “screen scraping” method of collecting data raised security and contractual concerns with banks, said the Institute of Certified Bookkeepers last year.
A bigger problem was that some Saasu and Xero accountants and bookkeepers claimed they had to rework accounts because of duplicate or missing transactions.
The heart of the issue was a difference between marketing and reality. Cloud accounting companies sold bank feeds as a revolutionary feature without explaining that a feed was a compilation of data by the software company and not the raw statement data from the bank.
In an ideal world the bank feed is an exact copy of your paper bank statement. In this situation the feed could be relied upon as a statement of record. Xero at one stage were happy to tell bookkeepers, accountants and their clients that bank feeds didn’t need checking.
But the truth is that often a bank feed is not a feed from a bank. And even when it is, the feed can still contain mistakes.
Now a sign that the pragmatists in Xero have won over from the idealists. Last month the company emailed partners about a change to the reconciliation screen.
“When all the statement lines are reconciled, a message will now appear explaining that the statement balance in Xero may not match the bank account balance, and that it’s a good idea to cross-check the two to make sure they match up.
“We’re adding this message to remind your clients that the statement balance in Xero isn’t a live account balance from your bank but is calculated using your opening bank balance (conversion balance) plus daily imported statement lines. Occasionally, things like duplicated or omitted statement lines can throw this balance out,” Xero wrote in the message.
Xero users were notified of a minor three-line update, the third line of which read:
Added a reminder to double-check your balance and transactions in the bank reconciliation report.
Business users often complain that big software companies don’t listen. In this case they have no complaints.
MYOB has used its acquisition of BankLink to promote the superior accuracy of its bank feeds over the Yodlee-powered competition. But while MYOB can claim many fewer errors, they can’t say they have eliminated them.
I contacted several bookkeepers and accountants before writing this post to gauge how often they found errors in feeds. One bookkeeper with six clients said she still came across an error every other day, but two accountants with hundreds of clients said they only saw a couple of instances a year across the board.
The reason for the discrepancy could be that smaller banks are less reliable at providing feeds or the varying experience of the bookkeeper or accountant.
“If you are actually entering all the invoices it’s easy to see if something is missing. I think the issue is majorly over-played. If people were using the software properly there would not be too many issues,” said one senior accredited accountant.
The second change of heart came from the ICB, which in the past has played a conservative line on sharing bank details with Yodlee.
The bookkeeping institute gave Xero the highest score for bank feeds in an independent review of desktop and cloud accounting software programs from MYOB, Reckon, Intuit and Saasu.
The ICB drew its conclusions from a team of four reviewers and a panel of seven senior consultants accredited with the major vendors.
“Our information is that the accuracy of bank feeds is not a significant problem,” Addison said.
Xero and Saasu also scored highest in their ability to verify bank feeds. (Interestingly, MYOB’s cloud program LiveAccounts also scored an 8 out of 10 but the AccountRight 2012 and Live programs scored a zero. MYOB would argue that BankLink’s high reliability makes such checks unnecessary but the ICB disagrees.)
Given that, prior to bank feeds, bookkeepers were responsible for data entry of bank transactions, their opinion is worth listening to.
One day the bank feed will be a statement of record and a warning won’t be required. But we’re not there yet.
Now at least business users can enjoy the great productivity benefits of bank feeds and know they need to keep an eye open for the odd error.