Machine learning, 3-way matching and robotics process automation are powerful technologies in the finance industry. But there’s another powerful technology you should be dialed into – application programming interfaces (APIs).
In fact, APIs might be the most important technology of these four because without them the other technologies can’t be used to their full potential.
In this blog, we’re going to explain what APIs are and then share the latest research and insights highlighting the benefits APIs deliver to you and your business. Then we’ll provide steps you can take to maximize the value you gain from APIs.
What is an API?
Think of an API like the plug you insert in your wall to turn on your desk light. You don’t need to know what happens behind the wall with the wires to turn on your light. The same is true with APIs in your finance system. They turn on or connect your systems, but the complexity doesn’t affect you. APIs simplify your life.
In accounts payable (AP) automation, an API plugs into different software programs, unlocks the data and turns on the communications between them so they can connect and share information and functionality. That means sending and receiving payment and invoice data seamlessly and quickly between your AP software, accounting software and enterprise resource planning (ERP) software without user intervention.
Benefits of APIs
APIs save you money and time
APIs are extraordinarily valuable because of their cost- and time-saving benefits. And all that starts with the massive reduction in the lines of software code needed for APIs to work. These interfaces reduce the number of lines of software code often from thousands to as few as 10.
Why? Because most of the lines of code have already been written for these applications and have been used by many other companies with the same challenge – connecting their financial systems. This is huge.
As a result, you don’t have to write software code from scratch and your financial systems can connect and share data much faster and at lower costs. So building finance applications that used to take months or years can be finished in days, weeks or even hours. And that time savings translates to cost savings.
IBM brought home the value of APIs by considering life without them. “Without APIs, many enterprises would lack connectivity and suffer from informational silos that compromise productivity and performance.”
APIs help you make faster payments, fewer mistakes
APIs help your finance team automatically collect payments and track invoices faster, reduce manual data entry and avoid mistakes. These interfaces also help you create and deliver new services to existing markets, connect with and enter new markets and collaborate with more external partners.
To quantify these benefits, Mulesoft surveyed 800 IT (Information Technology) leaders from global enterprises. These powerful stats emerged:
- 80% use APIs
- 54% increased productivity using APIs
- 69% of API users are less likely to report integration challenges
- 31% of company revenue is generated from APIs
Financial Applications of APIs
The finance industry’s use of APIs is already widespread. Leading AP software providers often integrate with up to 30 or more accounting software programs. Why? Because the more API integrations AP software providers can successfully achieve, the more connectivity and data sharing their software can execute faster with other financial software, applications and networks. That, in turn, increases the software’s value because it boosts productivity, payments and business opportunities.
During the next several years many more AP automation providers will quickly start increasing their number of API integrations because it’s a key competitive differentiator. Successfully integrating more APIs opens more revenue-generating opportunities for you and creates more efficiency in AP operations.
Accounting Applications of APIs
In addition to the AP automation arena, APIs deliver value to the accounting profession. According to CloudBlue, “accountants use APIs to automate key processes such as filing tax returns and retrieving data on client status and liabilities. This frees up time usually spent on data entry and administrative tasks, allowing them to invest more effort into billable and value-adding work.”
Accounting teams also use APIs to:
- Process large amounts of data while streamlining workflows
- Generate large quantities of monthly payments
- Automate invoice processing and tracking
API Market Growth
Broadly, the size of the API market in the financial industry is expansive and growing. Coherent Market Insights issued a report about the size of the global telecom API market, which includes several functions, such as payments. Valued at $194 billion in 2019, the market is projected to rise to $933 billion by 2027. That’s an annual growth rate of 23.6% between 2020 and 2027.
Final Thoughts
Inevitably, APIs will become increasingly important in your finance career. So, what steps should you take to benefit from this trend? Here are three:
1. Learn all you can about what APIs do.
Take the time to learn how they function and what efficiency and integration benefits they deliver for you. You’ll then appreciate how important APIs are for boosting productivity in your finance department with less manual work and fewer mistakes. Dig in. It’ll pay off in your career and for your finance team.
2. Focus on actual financial benefits your business can gain using APIs.
It’s crucial to learn how APIs reduce your expenses, speed up payment and invoice processing and minimize mistakes. Calculate specific financial investment returns. Go after the real numbers based on actual scenarios. Then you’ll appreciate more deeply why APIs make AP automation systems more powerful.
3. Find out which AP automation software companies have APIs that integrate with your accounting software.
It’s worthwhile to know who’s integrating with whom and how many integrations connect to your accounting system. If a company is leading in the number of API integrations, that’s a clue they’re among the leaders – if not the leader – in total AP software installations.
And dive much deeper into the fascinating world of APIs – the number one fuel igniting the AP software market this year and beyond. Open your mind to all you can learn about them. They’ll empower you and your business to boost efficiencies, integrations and revenues this year and beyond.