Open Accounting Data What is it that matters to SMEs
Although based upon well-established accounting principles, the data isn't generic.
Every company sets up its management accounting accounts in its manner. Businesses operating in the same industry with a similar audience and business models often use completely different terms and concepts to define their performance. Accounting data gives insight into how an organization views its internal processes. It's a living record made over a long period and must closely reflect management's plans and effectiveness.
Exchange of data with banks
Financial institutions and lenders who offer small-scale business loans depended for years upon MI (management details), which is an image of the company's accounting information, typically accompanied by a few explanatory notes. Although having a copy of accounting information can be beneficial, it's similar to taking a store picture for security instead of a live CCTV feed.
1) It's impossible to tell the real picture of what's happening
2) There's a delay in the manual procedure of receiving the information and then reviewing, approving, and submitting it. In the case of a small lender, this may be as little as a few weeks, but more reputable lenders' processes take longer, up to six months in some instances. Fortunes can change in the time between, and a borrower's creditworthiness, which was once a good one, could deteriorate significantly.
Persistent access offers an actionable view
There's no better option than having accounts for SMEs built over time, and accounting platform APIs facilitate precisely this. Companies can now grant continuous access to account information for service companies.
A company can gain access to credit and investments faster and more quickly than ever. The company may also consent when applying for a loan that will permit monitoring throughout the loan.
The permission may be revoked when the loan is not granted or if the circumstances change to the point that it's not required anymore. People who borrow appreciate this exactly as LinkedIn currently has comprehensive privacy guidelines, and, as is the case under GDPR, users want greater control over their data. The ability for users to make contributions and use their data is the easiest and most effective method to take advantage of this control.
Ongoing data synchronization has several advantages
First, the company has no way to modify the accounts before sharing a photo of the most favorable picture, also known as window dressing. Open accounting data records every transaction and provides an accurate and reliable record of ongoing performance.
This allows service providers to identify the risks inherent to a business model and to ensure that they can be dealt with quickly, to make sure the loan is more likely to not default.
Second A snapshot of the possibility of continuous accounting data. It is the closest an outsider can have to understanding how money is made and spent in a business without having to supervise managers constantly.
Automating data input
Alongside extracting performance data from accounting APIs, they can also facilitate the push of data into the accounting software. This could include anything from banking transactions to invoicing.
Smaller businesses are likely to have multiple transactional and accounting software. Accounting software is increasingly the only source of information for small-scale business owners, and capturing the truth is best achieved by directly integrating it.
The result is that open accounting data boosts efficiency because it makes the writing and reading of accounting programs more efficient. This allows the business owner and service provider to create the most value for their customers.