By Günther Peer, Reval Regional Vice President Solutions Consulting, EMEA
An update on SEPA migration published by the European Central Bank (ECB) in January 2014 shows that implementation on SEPA Credit Transfer (SCT) is progressing well, whereas migration to SEPA Direct Debits (SDDs) is still challenging many corporations.
The good news for some corporations is that banks will accept payments in national formats for another six months while the formal SEPA compliance deadline has been hit on 1st of February 2014. The European Commission made clear though that after August 1st there will be no further extension. Although, payment processes will not be disrupted for now, corporations should not wait until the last minute to implement the new regulation.
In order to assure compliance, finance professionals should start reviewing the following tasks to get their SEPA project up and running:
- Work on static data – Make sure IBAN and BIC are in place for every creditor and debtor (when applying SDDs). Conversion services that are widely available help to automate this process, but a certain amount of manual effort will be required in any case.
- Check on the formats – SEPA requires xml messages. Thus, the company´s treasury technology as well as the ERP system needs to be ready to create and process these message formats. When talking to solution providers about these capabilities, take the opportunity to ask for best practices. As most treasurers in big corporations have already completed their SEPA projects, these partners should have gained some experience by now.
- Test with banks – Although SEPA formats are meant to be a standardized, different countries and even different banking groups might have slightly different interpretations and may bend the rules as needed. Thus, payment transfers should be tested, at least with key banks, in order to avoid surprises.
- Update mandates for direct debits – In case SDDs are used, the SEPA project manager has to make sure all mandates for executing direct debits are updated. This could become a fairly big exercise, as it is not always possible to convert existing mandates automatically. Furthermore, changes with regards to advice and rejection have to be understood and taken into consideration in Accounts Receivable (AR) processes as well as cash forecasts.
- Secure internal IT support – The “real” SEPA deadline might even be closer than the “official” deadline as internal IT resources might be limited. Therefore, the internal IT team should be involved in the SEPA project right from the beginning.
- Be smart and think ahead – Treasurers should always consider future requirements and potential consequences when using, for example, conversion services to produce xml messages and enrich payments with the necessary data. As schedules are not that tight any more, workarounds should be avoided and the course set for further optimization projects.
- Outsource parts of the project – Many treasury departments secured additional budgets for external resources in order to assure compliance in time, before the deadline was extended. Although the extension allows more time, the race for external resources may make it increasingly difficult to get these resources on board.
- Learn from peers and industry experts – Most treasurers have already completed their SEPA projects. Therefore, it might help to prepare for further payment optimization by exchanging views with peers and other industry experts.
While the compliance pressure has been alleviated for treasurers who have come into the New Year with their SEPA migration projects already completed, it has not gone away for those who are still at the beginning of their journey. These treasurers should be kicking off implementation now to avoid falling behind and missing the opportunities SEPA provides in payments optimization.