BAI2- a widely accepted and used Bank Statement Format for Bank Reconciliation

Corporates make millions of dollars Payments and Receipts by using different payment methods, i.e. ACH, EDI, Wire, Checks, etc. Some years ago, it was a tedious job to reconcile the Book Bank Balance vs Bank Balance manually, due to a large volume of transactions. With the change in technology, Corporates developed their formats (custom) to import the Bank Statements into their system and reconcile the payments and receipts. However, the challenge that emerged was that, if you change your ERP/ Accounting system or change the Bank, you need to develop the new format as the existing format may not be useful or meaningless.

To have uniformity in the Bank formats, BAI (Bank Administration Institute) developed a generic format and it is widely accepted by most of the Banks in USA. That format is called BAI2 format.

The Big Idea

With digitization in every field, traditional methods of Banks have been drastically changed. Manual processes, i.e. sending hard copies of Bank statements to customers has been changed and the bank started providing the bank statements in electronic formats. Now Banks have accepted common formats across the globe which is not only benefitting them but also to their customers. BAI2 format is one of them and the same has been successfully adopted by all the ERP’s and Oracle Applications is not an exception.

What is BAI2

BAI2 format is getting used by Corporates to import the Bank statements in the system and will be used for reconciliation. BAI2 file format is a standardized set of codes which comes in text format. It contains the data related to AP Payments (negotiable and void status) and Receipts (remittance status).

Below mentioned are the Record Types used in BAI2 format:

**Reference: https://www.bai.org/docs/default-source/libraries/site-general-downloads/cash_management_2005.pdf

Commonly used BAI2 Transaction Codes in Oracle Applications.

Sample File Template

The Audience:

This document will help the Organizations where Oracle Application is already implemented, and not importing the Bank statements or those wanting to move from other ERP/legacy system to Oracle Applications and wanted to Import Bank Statements. This will also help BSA’s who are working on Oracle Applications.

Pain Points

All corporate faces the issue of Reconciliation between Book Bank Balance vs Bank Balance.

Generic reasons

• Manual method of reconciliation.
• Huge volume of Payments and Receipts
• The Bank is not providing Bank statement on a timely basis

Transaction level reasons

• Suppliers not depositing the checks on a timely basis
• Customers have transferred the money directly into Bank Account without providing details
• Check bounce or insufficient balance issue
• In above mentioned situations, Accountant finds it difficult to reconcile the balances.

Format reasons

• Custom formats will not be useful if you are changing the Bank.

Reasons to use the BAI2 format

• Standard format created after considering the corporate need
• Accepted by most of the Banks in the USA
• Easy to use
• Low maintenance
• Can be used even if you change the Bank.

Prerequisite for BAI2 Configurations in Oracle Applications.

• Bank / Bank Branch/Bank Account: Bank/ Bank Branch/Bank Account details need to be entered in the system which is going to send the BAI2 file.
• Transaction Code: Define Transactions Code same as BAI2 specifications
• Parse Rule Sets: commonly used to parse data from the statement line addenda field into more specific statement line fields (for automatic reconciliation only).
• Transmission Configuration: Define SFTP server name / Remote File and Directory Name/ Decryption Key etc.

BAI2 file import and Reconciliation Process
For Accounts Payable (AP)

• Make Payment to Suppliers
• Send Positive Pay file to Bank
• Supplier will deposit the check in the Bank
• Void payments by Corporate, if required
• BAI2 file import by using Transmission configurations (by schedule program- Process electronic bank statements)
• In Cash Management, Auto-Reconciliation program in Cash Management (Schedule Program) to reconcile the payments or Manual reconciliation

For Accounts Receivables (AR)

• Payments received in the Bank
• Download the statement from Bank Portal
• Create Receipts and apply against the transactions
• BAI2 file import by using Transmission configuration (by schedule program-Process electronic bank statement)
• In Cash Management, Auto-Reconciliation program in Cash Management (Schedule Program) to reconcile the payments or Manual reconciliation

** Auto reconciliation program can be part of Process electronic bank statement program**

Summary:

To summarize, with digitization, reconciliation between Book Bank Balance and Bank Balance has become easy. Standard Bank statement format such as BAI2, is a good option for the same. It is simple to implement, helps to reconcile and expedite the Period close and makes Accountants' life easy.