What Is a Bank Feed and How Does It Work for Accounting?

A bank feed provides a direct, digital link between your financial accounts and accounting software. This connection automatically imports transaction data, offering an up-to-date view of your financial activities within a centralized system. Bank feeds streamline financial processes by eliminating manual data entry, helping businesses maintain accurate and timely financial records and reducing errors.

The Mechanism of Bank Feeds

Bank feeds operate through a secure connection between financial institutions and accounting software. This connection typically uses Application Programming Interfaces (APIs) or secure file transfer protocols. Some systems also work through third-party data aggregators. Data is pulled automatically and regularly, often daily or in real-time, ensuring the accounting software reflects the latest financial activity.

When a data aggregator is involved, it acts as an intermediary, securely collecting financial data from banks and transmitting it to the accounting software. These aggregators maintain secure connections with numerous banks, facilitating information flow without direct interaction between every bank and software provider. This ensures transaction details are accurately and efficiently transferred.

Information Transferred

Bank feeds transfer transaction data from your financial accounts into your accounting software. This data includes the date, amount, description or payee, and sometimes a basic category. For example, a debit card purchase shows the date, dollar amount, and merchant’s name. The feed also updates account balances, providing a current snapshot of funds.

Once this data enters the accounting software, users can review, categorize, and match transactions. The software may suggest matches for invoices or bills, simplifying reconciliation. The accounting software provides tools to organize and interpret this data for various accounting tasks.

Setting Up a Bank Feed

Connecting a bank account to accounting software via a bank feed involves specific steps. Before setup, ensure you have your online banking login credentials, including username and password, available. Some financial institutions may also require specific account numbers or multi-factor authentication details. Complete any partial bank statement imports or reconciliations to avoid duplicate entries.

Steps begin within your accounting software’s banking or connections section. Search for your financial institution by name and select it. The software prompts you to enter online banking credentials to authorize the connection. Select which accounts (e.g., checking, savings, credit card) to link. Upon successful connection, the software imports historical transactions (often up to 90 days) and synchronizes new transactions automatically.

Data Security Considerations

Data security is a key concern for bank feeds, with measures to protect sensitive financial information. Data transferred via bank feeds is secured using strong encryption protocols, such as 256-bit SSL/TLS, ensuring information is unreadable during transmission. Accounting software does not store bank login credentials directly; it uses secure tokens or relies on third-party aggregators with robust security practices.

Multi-factor authentication (MFA) is used, requiring users to verify identity through multiple methods, such as a code from a mobile app or a biometric scan. This adds protection against unauthorized access. Bank feeds provide read-only access to transaction data, meaning no one can initiate or alter transactions.