Can You Trust Bank Feeds?

It’s common knowledge now that if you are using cloud accounting software, you have access to bank feeds i.e. your bank transactions are pulled into your accounting file from your bank institution on a daily basis via the magic of the “cloud”. This means that you have up to the minute updates on exactly what’s happening in your business accounts. This is a great thing – no doubt. It also means the amount of time you would otherwise spend on tedious data entry is considerably reduced – what’s not to like? Undoubtedly bank feeds have been a real boon for business owners and bookkeepers alike but lately, due to some recent events in our BAS Agent practice, I have started to wonder if we actually can or should trust bank feeds. Let me tell you what happened……

Late last year we acquired a new client who was using cloud accounting software (no need to name the software – irrelevant to our story) and had been doing so for over a year. We were engaged to process his quarter 2 BAS and then maintain the file from that point onwards, including reconciling his accounts on a monthly basis and processing all future activity statements. We completed the Q2 BAS noting that we had to do quite a few adjustments etc. to the accounts to raise the correct figures but expected nothing less as it was the first time we had worked with the file. Now it’s worth noting that this particular client has 6 bank accounts plus a credit card account which is quite unusual as most businesses would only have 1 to 3 accounts at the most. Nonetheless, each account is connected to its individual bank feed and all works well……..or so we thought!

So here’s the picture so far, all bank accounts have been reconciled via actual bank statements as of 31st December 2012 and the Q2 BAS has been lodged. All good? Yep – great actually considering none of the bank accounts had ever been reconciled since the start of the file (groan). So a few weeks ago we “visited” the client’s file to process bank reconciliations for the month of Jan 2013 as per our client-BAS Agent agreement.  That’s when the proverbial sh#t hit the fan! We compared bank statement end-of-month balances to those in the file for each account – none of them were correct (groan again). Upon further investigation, we found that large chunks of data had been “dropped” from each of the bank accounts which was the cause of the incorrect balances. We were able to manually input the data and reconcile the accounts but this meant that what should have taken no longer than an hour, ended up taking us a lot longer much to the dismay of our client.

Since January, this has continued to happen in this client’s file and is an absolute pain in the you-know-what! Which bank is it you ask? That’s the one, “Which Bank” but actually we’ve had similar experiences (not to such a wide extent) with other banks and other cloud-accounting-based clients. “Data dropping” as we like to call it, is a very real problem. These clients know that we will check their files and ensure that all bank accounts are reconciled to their actual bank statements, not just via the bank feed and so they aren’t really worried about this bank feed issue even though it’s a nuisance for us! So this leads me to ask some questions about bank feeds:

• What about cloud accounting users who do not have a bookkeeper over-seeing their file – are they relying purely on the data coming via the bank feed to establish their accounts and process their BAS without checking it because in their minds it is now all automated and therefore correct?
• Cloud accounting software would be nothing without the functionality that bank feeds brings to it and this is a major selling point for many users. That said, isn’t is reasonable for users to expect that they can rely on the data in their files especially when they are paying for it?
• How many users’ files out there contain inaccurate data due to faulty bank feeds?
• How many users believe that just because the accounting file “reports” that bank accounts are reconciled that they actually are reconciled in terms of matching real-life bank statements?
• Whose  fault is this – the banks or the software? Who’s going to fix it?
• Shouldn’t the software creators be warning users that bank feeds are not always accurate and that they should check their data regularly?

I could go on and on but am conscious of the length of this blog so I’ll bring it to a halt. To summarise, I think it’s important for cloud-based accounting users to be aware that you cannot trust the data coming to your files via bank feeds. Unfortunately, as it stands currently the technology isn’t perfect. Until it is, I advise all cloud-based accounting users to religiously check their bank accounts via actual bank statements and not to just rely upon the data coming into their files via bank feeds. If you don’t know how to reconcile your bank accounts using actual bank statements then engage a good bookkeeper to do this for you – at least then you’ll know that your figures add up bank feeds or not!

As an aside, the client in our story told us that if we had not brought this is issue to his attention, he would have gone on blissfully unaware that his accounts were “not really reconciled” (even though his file showed him that they were)and would have lodged his BAS using the data from his file – scary stuff! Attention ATO, this stuff is happening!

Have you had similar experiences with faulty bank feeds? Were you aware that bank feeds are not 100% accurate?

PS – “BoxFreeIT” have written an article about this topic and we are featured in it along with other bookkeepers – here’s the link to the article for interested readers: Check Unreliable Bank Feeds in Xero, Saasu: Bookkeepers