Connectivity with APIs: key to optimising treasury

Treasury management is a critical aspect of any business, and requires efficient planning and control of cash flows and associated risks. The current digital era has helped to improve this important aspect of any business, and the automation of financial processes has become a necessity for effective treasury management. 

In this sense, APIs offer great potential to improve the efficiency, speed and transparency of financial processes, especially in everything that has to do with liquidity and cash management. In this article, we will explain what an API is, how it works and how it can help improve your company's cash management.

What is an API and how does it function

An API (an acronym for Application Programming Interfaces) is a joining tool and protocols that allow communication between different computer systems. 

APIs allow different applications and systems to communicate with each other and share data efficiently and securely, making it easier for developers to integrate different functionalities into their own applications without having to build everything from scratch.

 This means that APIs are essential for the interoperability and the integration of applications, and is a fundamental part of the modern technological ecosystem. From social networking to online banking, APIs are behind much of the applications and services we use daily.

At the enterprise level, the most common use of APIs is between an internal system, such as an ERP or other software, and an external system, such as a supplier's CRM for customer management, a customer's purchasing management application or a bank's middleware.

The APIs can be public or private and they are designed to realise specific functions, such as the transmission of data or the execution of tasks.

APIs in treasury management: what are their characteristics

APIs offer a great opportunity to improve treasury management in companies as they can automate many of the manual processes associated with treasury management, which can improve efficiency and reduce human error.

From a treasury perspective, APIs are a communication channel between a company's treasury software and the banking and financial systems with which it interacts.  

By connecting to an API, treasury software can access relevant information such as bank account balances, fund movements and foreign exchange transactions, among others. It can also send and receive payment orders and make transfers, allowing for more complete automation of financial processes.

To use an API for treasury management, the company must have access to treasury software that is compatible with the API of the bank or financial institution with which it operates, or of the system with which the ERP is to be connected. Once the connection between the software and the API is established, data can be transferred and processed in real time, either on demand or through an automated process, allowing for a more agile and efficient treasury management.

How APIs can be applied in treasury management

Until recently, most corporates' banking connectivity was via dedicated peer-to-peer (P2P) networks, usually through SWIFT channels. The bank sent the information to the corporation (and vice versa) via standardised files (such as the AEB 43 or MT940 for the bank statement, or the 34-book for SEPA credit transfers).

The problem with this type of infrastructure was that information generally flowed periodically, but never in real time. For example, statements were received at the beginning of each day with the previous day's information, and the treasury did not have up-to-date information at the time of consultation. And while payments and other transactions were quick, they were not immediate.

APIs aim to eliminate these sometimes difficult-to-maintain banking connectivity protocols and reduce nightly and daily processes, some of which can be time-consuming. Thanks to their potential, treasurers can now access banking information on demand and in real time.

But APIs do not only ensure integrated and complete banking connectivity. Sometimes the needs of treasury departments also focus on other aspects, such as invoicing or even company accounting. APIs also enable communication between treasury and each of these modules.

Advantages of API integration

APIs have a number of benefits and uses for businesses, especially when it comes to banking connectivity and treasury management. Below, we review some of the most important ones. 

• Integration of accounts and accounting records for better bank reconciliation: one way in which an API can be implemented in treasury management is by integrating accounts and accounting records for better bank reconciliation, once the bank statement is received. This means that accounting and bank records can be reconciled automatically through ad-hoc processes, reducing the need to perform this task manually.

• Increased efficiency in the payment chain by reducing human errors: integrating an API into treasury management can also improve efficiency in the payment chain by reducing human errors. This is because automating financial processes can reduce the need for human intervention, which in turn reduces the risk of errors and delays in payments. 

• Global and immediate visibility of the company’s transactions: the API allows greater visibility of the financial transactions carried out by the businesses in real time, through a single platform, even if it has opened several bank accounts or contracted several financial services. In this way there is complete control and the loss of relevant information is avoided.

• Greater control of the company’s financial position: by having the information available in real time, the treasury department can gain greater control of the financial position of any business, enabling more informed, efficient and, of course, faster decision making.

• Immediate fraud detection: APIs can also be used to detect suspicious, anomalies or fraudulent transactions in real time, this allows immediate action to be taken to minimise the impact of fraud on the company.

• Improving the decision-making process with accurate information in real time: as we have already mentioned, employees can access all information related to the company's liquidity in real time, either on demand or with specific and automatic processes dedicated to it. This has multiple advantages, but the most important of all is that the information available and reconciled is real at all times.

• Automation of otherwise time consuming tasks: APIs, combined with other digital and technological tools (such as artificial intelligence or big data), enable the automation of routine tasks, freeing treasury managers from repetitive tasks and allowing them to focus on more important tasks.

• Customised reports for more data to make decisions: APIs enable the generation of customised reports, helping treasury managers to have a clearer view of the company's financial position and make more informed decisions.

• Allows the treasury department to focus on value-added tasks: all these benefits together allow treasury managers to focus on more value-added tasks, such as analysing financial reports and making strategic decisions. After all, technology should be a means to make people's lives easier.

How Embat helps you to optimise your treasury

Embat is a treasury management solution that offers a set of APIs to integrate banking and accounting transactions in real time. Thanks to our services, you can schedule your bank reconciliation processes, which means that accounting and banking records can be reconciled automatically. In addition, Embat offers customised reports so you can make decisions based on accurate, real-time data.

What are you waiting for to try Embat? Visit our website and discover our treasury solutions and how it can be adapted to your needs.