By Günther Peer, Reval Regional Vice President, Solutions Consulting, EMEA
Although most SEPA projects are complete, or are close to completion, treasures should not consider their focus on payments as being over. Instead, they should consider SEPA a preparation exercise and take the next steps towards optimization and sophistication in payments management.
As the trend towards payments centralization will continue after the SEPA deadline, companies should start kicking off new initiatives around optimizing payments, either by leveraging their current treasury technology or by considering new technological investments for 2014. Here’s why:
- SEPA enables growth through easier access to new markets and reduces float and payment fees through harmonization of file formats and payment instruments. Building on the simplification in international payments, advanced payments centralization concepts such as payment factories should be implemented and rolled out on a global basis. With their advanced capabilities, payment factories help treasurers to further reduce bank transaction costs, optimize liquidity and create cash visibility through automating the import and export of payments files in different formats, including format conversion and centralization of all aspects of payment initiation, approval and release workflow. Payment factories are commonly part of modern treasury technology, but many treasury departments have yet to take full advantage of their capabilities.
- SEPA enables companies to rationalize their bank accounts – in theory down to one single account for all Euro payments. However, in order to reduce the number of bank accounts, companies need to have an overview of all enterprise-wide bank accounts. Modern treasury technology provides real-time visibility into all bank accounts, enabling companies to reduce the number of bank accounts. This helps companies minimize associated costs and manage bank relationships more efficiently. Although the number of Euro bank accounts won´t be reduced to a single account, we will likely see corporations working with fewer bank partners in future, choosing only to work with those banks that are more aligned with the business, for example, those with a similar geographic footprint.
- SEPA helps to improve bank statement reconciliation through more standardized and comprehensive information. These improvements help facilitate straight-through processing and keep repetitive, manual work to a minimum. Again, treasury technology plays a central role in connecting corporations to their banks and gathering cash balances automatically. Aside from efficiency gains, treasurers also benefit from increased visibility, enabling them to improve cash forecasting and liquidity planning.
- SEPA XML messages are part of an international standard: the ISO20022. The current CGI (Common Global Implementation) initiative works towards creating messages that could be used in international transactions, including Euro and non-Euro transactions, which again would make the implementation of payment factories significantly easier in future. Good progress in some early projects already shows the benefits of this initiative.
Technological investments facilitate payments optimization on the back-end by providing the treasurer with the tools required to automate payment processes and implement sophisticated payment optimization models. Therefore, whether a company is currently implementing SEPA or has already completed the migration project, all treasurers should think about what life could look like after the SEPA deadline and how they could leverage their treasury solutions to take payments management to the next level.