That allows them to gain deeper insights into potential borrowers and ultimately make stronger, smarter credit decisions. If they want to extend lower interest rates, appeal to a broader market, or serve larger businesses, they need to be able to evaluate finances holistically and consider banking and accounting data in tandem.
In this post, we cover what banking and accounting data have to offer on their own, how they can work together to paint a fuller, more accurate picture of SMB finances, and how the best APIs on the market enable modern lenders to access and analyze both seamlessly. Lenders are often interested in seeing an overview of all the financial accounts an SMB holds.
The downside? When it comes right to it, banking data just shows the who and how much of each transaction, without any explanation. The accounting system is often the financial hub of a business, where all debits and credits are aggregated and categorized in the general ledger.
Consulting this centralized data allows lenders to better understand how and when a company makes payments, identify red flags that could indicate impending bad debt, and take a proactive approach to minimize losses.
When dealing with larger companies—which are more likely to use multiple banking products and have complex payment terms with both customers and suppliers—accounting data can also help lenders cut through the noise and get a clearer view of cash flow. Still, accounting data is user-generated, meaning business teams can go in and alter the numbers at any time—leaving it vulnerable to manipulation, poor bookkeeping, human error, and worst of all fraud.
