Explore the ins and outs of accounting integrations and the strategic benefits of embedding deeply into your customers’ financial operations.
Against the backdrop of a competitive market, finance leaders are looking for payment solutions that enhance operational efficiency for their teams. As the industry evolves, cross-border payment providers are under pressure to differentiate themselves beyond just pricing. To remain competitive and attract more customers, many providers are prioritizing user experience and automation.
Why is this important? Automation is transforming how businesses handle daily payment obligations. By reducing manual processes and cutting operational costs, cross-border payment providers are re-engaging inactive clients and those who currently process only a small portion of their foreign payments on the platform.
The key to success: Deep integration with financial operations
Providing seamless payment experiences that are fully integrated into customers’ accounting systems is becoming the new standard. By offering this functionality, cross-border payment providers can build stronger relationships and offer a solution that fits naturally into their customers’ existing workflows.
But where do you start? We’ve created this essential guide to help you understand the challenges your customers face, explore the different types of accounting integrations available, and explain why offering a holistic solution is crucial to staying ahead in a crowded market.
Accounting 101: What is bank reconciliation and why does it matter?
Bank reconciliation is a vital monthly process for businesses, ensuring that the transactions recorded in their accounting systems align with those in their bank statements before closing the books. This practice is essential for identifying discrepancies, such as missing payments, bank fees, or errors. According to research from Pay.UK, the average business dedicates around 3.6 hours each week to this meticulous task, which involves several detailed steps, including:
- Retrieving bank statements manually
- Comparing sales, expenses, and deposits in their accounting system with bank records
- Spotting discrepancies, such as unrecorded bank fees or outstanding payments
The solution: Accounting automation
Accounting automation involves leveraging software and technology to streamline and automate repetitive, manual accounting tasks, like the one described above. By minimizing human errors and reducing the time spent on reconciliation, it allows businesses to focus on higher-value activities. Accounting integrations are one of the most powerful ways to automate these processes for your customers.
What are accounting integrations and how do they help?
An accounting integration connects your platform with your customers’ accounting software, allowing financial data to flow seamlessly between the two systems. The benefits are clear: reduced manual entry and errors, improved real-time visibility, and enhanced overall efficiency.
While the majority of spend management providers and neobanks have had comprehensive accounting integrations in place for some years now, cross-border payment providers have been slower in recognizing the importance of these features. This has resulted in somewhat of a deficit in the connectivity offered by traditional players in comparison to newer entrants. More on that here.
Types of accounting integrations
In the realm of accounting integrations for cross-border payments, you’ll typically come across two main types. Below, we outline the differences between them.
1. Bank Feed
A bank feed offers a direct connection between your platform and your customers’ accounting system, automatically syncing transactions and eliminating the need for them to manually upload statements.
Here’s why that’s important: Thanks to the double-entry accounting principle, businesses are required to match or reconcile every single transaction they make against an accounting entry of the same amount. That means that every time a business uses your service, they incur a significant administrative burden. And if your customers are handling a large volume of transactions, it could mean reconciling hundreds of payments manually each month. By integrating a bank feed, cross-border payment providers alleviate this burden for their customers.
It also offers customers real-time visibility into cash flow and simplifies financial reconciliation, reducing errors and saving time while enhancing accuracy. Consequently, businesses can better manage liquidity, track payments, and produce precise financial reports.
In case you’re wondering what’s in it for you, a bank feed is the table-stakes integration for any cross-border payment provider offering an account for customers to spend and receive foreign currency. They’re now so widespread that it’s something that business customers simply expect and can be a barrier to winning market share from traditional banks if not offered.
Plus, providing this feature makes businesses more inclined to use your service for processing more (and larger) transactions, because you’re addressing a major pain point for them with automated reconciliation.
2. Bill Payment (Accounts Payable) Integration
A bill payment or accounts payable integration helps your customers automate the end-to-end process of paying suppliers, vendors, and contractors. It allows your customers to extract unpaid bills and supplier details from their accounting system, pay international bills directly from your platform, and then sync payment data back into the accounting system afterward.
Recent research from Codat revealed the accounts payable process to be the most time-consuming task faced by mid-market finance teams, surpassing other responsibilities like expense management, accounts receivable, and even financial planning and strategy.
These results are hardly surprising. The diagram below illustrates just how arduous the accounts payable process can be for business.
However, by providing a solution for this painstaking task, cross-border payment providers can alleviate a major challenge faced by their business clients.
In turn, this integration offers several benefits to providers, like enhanced customer satisfaction and loyalty as well as increased payment volumes. Bill payment integrations are an effective means of driving higher transactions volumes by making it easier and more convenient for business to pay international vendors.
Why forward-thinking providers are delivering both
In today’s competitive landscape, your success depends on providing a solution that not only addresses as many of your customer’s pain points as possible but also stands out as the most extensive option available on the market.
Offering both bank feeds and bill payment integrations creates a more comprehensive solution for businesses. Bank feeds keep track of overall cash flow and provide real-time transaction data, while bill payment integrations simplify and automate paying international suppliers and vendors.
Offering both presents numerous advantages, including improved customer acquisition and retention, as well as enhanced competitive differentiation. By integrating your platform deeply into their operations, businesses become more reliant on your services. This dependency fosters customer stickiness and raises switching costs, making it challenging for customers to transition to a new provider without causing significant disruption to their existing workflows.
Moreover, providing both features gives you a distinct competitive edge. While the majority of providers may offer only one of these options, your ability to deliver both significantly enhances your market differentiation.
Building accounting integrations: Understanding your options
At this stage, you’re probably sold on the benefits of both a bank feed and accounts payable integration. That’s great. The next significant decision is how to approach building this functionality.
Essentially, you have three compelling options to consider: offer APIs into your platform, build individual integrations yourself, or outsource the work to a specialist provider. Each has its own set of benefits and considerations, which we explore below.
1. Offer APIs into your platform for your customers to integrate to
With some development work from your customers, this approach enables them to integrate your platform into their existing systems. It allows users to customize the connections based on their specific needs, enabling you to cater to diverse user demands.
However, this could pose a significant barrier to entry for the majority of your customers. Only your largest corporate clients are likely to have the necessary resources and budgets to independently develop these integrations. Many others will find the development requirements overwhelming, limiting their ability to leverage the functionality.
But don’t just take our word for it. Leading cross-border payment provider, Ebury, initially pursued this option before deciding to work with Codat instead. Read below what they had to say about the experience:
2. Building individual integrations yourself
Building individual integrations yourself can be a suitable option if you are looking for total control and independence over the technology. But know that it will come at a hefty cost. Essentially, the decision hinges on how much time and resources you are able – and willing – to allocate to the build and ongoing maintenance on your product roadmap, distracting from your core product focus. Ultimately, it could be months or even years before you’re in a position to push any integrations live.
Keep in mind that building two types of integrations means twice the effort. It will take a pretty big investment in software development, data management, compliance, and others. Plus, you’ll need to gather a team of engineers who really know their stuff when it comes to bookkeeping practices, APIs, payment processes, and all the nuances that arise from handling FX.
It’s also essential to consider the diverse range of accounting systems your customers may use. If you have customers using different platforms like Xero, QuickBooks, Sage Intacct, or NetSuite, this could mean building to multiple accounting APIs multiple times, each with their own unique nuances and complexities.
Even after launching, you’ll need to invest heavily in ongoing updates, support, and monitoring to ensure the integrations are reliable, secure, and compatible with evolving APIs and regulations.
3. Working with a specialist provider
Collaborating with expert third-party providers offers many benefits that often outweigh the complexities of going solo. Below are just a few.
🧠 Domain expertise and experience: Navigating the complexities of accounting integrations within cross-border payments requires specialized knowledge. Codat brings years of domain expertise, having solved numerous accounting automation problems. This experience translates into well-designed solutions that cater to the unique needs of cross-border payment providers.
🛠️ Purpose-built & battle-tested solutions: We offer purpose-built data products that have been battle-tested by leading banks and non-bank cross-border payment providers worldwide. These solutions have proven successful in real-world scenarios, minimizing the risk of unforeseen complications and ensuring reliability and robustness.
🤝 Strong platform relationships: Working with Codat means leveraging our strong relationships with underlying platforms like Xero, QuickBooks, and NetSuite. These partnerships ensure seamless integration, up-to-date compatibility, and access to exclusive resources not available to standalone developers.
👩💻Comprehensive account management: We offer dedicated account management teams that consult on best practices to bring solutions to market. Their expertise drives value by optimizing integration strategies, ensuring a smooth rollout, and providing ongoing support.
🚀 Dedicated implementation specialists: Rapid go-live and testing rollout are critical to capturing market opportunities. Codat assigns dedicated implementation specialists to oversee these processes, ensuring a quick, efficient, and error-free launch.
Codat makes things easier
Codat helps providers like Nium, Currencies Direct, and Ebury level up their user experience with deep accounting connectivity. Our specialized products for accounting automation, Bank Feeds API and Sync for Payables, help cross-border payment providers get higher-quality integrations to market faster through a single, easy-to-use API.
Get in touch with our team of specialists with the form below to see how Codat could help you increase your competitive win rate and grow share of wallet.
