Companies should therefore begin or complete their preparations for the changeover right away. This requires that they indicate their own account identifier IBAN (international bank account number) and international bank code BIC (bank identifier code) on outgoing invoices and obtain the same information from business partners in order to conform their internal handling of payments to the new procedure.
Caution! Any delay in switching to the SEPA procedure can create considerable commercial risk. For example, if the vendor master data have not been changed to meet SEPA specifications by February 1, 2014 or respectivly August 1, 2014 and transfer orders are not implemented by the banks as a result, the discount for cash payment may be lost. Mistakes while changing over to the SEPA debit procedure could lead to even greater problems if receivables are collected from clients to any significant extent by way of direct debit. Delays in switching over would cause direct debits to fail, thus resulting in a significant cash shortfall for your company.
Most companies have probably already taken measures to switch to SEPA. However, they should at least be checked over one more time before the deadline of February 1, 2014 to make sure that they have complied with all the required provisions and modifications.
Do you already have things under control for the switch to SEPA? Use our checklist to make sure.
Tip: In order to ensure that you make the switch before the deadline, you should create a timeline showing when each step of the process needs to be completed. It is important to decide whether to switch over on a certain date or whether to test the SEPA procedure’s functionality in a parallel operation. It would also be advisable to train employees in the procedure early on in order to prevent mistakes when they start using it.
- Changing personal account information
Banks can assist you with changing personal account information into the kind of information required for the SEPA procedure. The result should then be presented to the client to check it over. Then the client master data need to be adjusted, keeping in mind that no umlauts may be used in the SEPA procedure.
- Notifying business partners of IBANs and BICs
IBANs and BICs should be sent to all business partners, either by mail or by email. At a minimum, they should be indicated on your website.
- Changing sample contracts and forms
The sample contracts, forms, invoice templates, and letterhead used by a company need to be changed into the new form.
- Audit of IT systems
IT systems need to be checked to make sure that they can process the new XML format used for SEPA wire transfers and debits. Software also needs to be checked to make sure it conforms to the new standards.
Note: Because the new format generates much more data, the performance of IT systems should also be tested for adequacy. It is of course also important to check the IT systems in advance to make sure that they are fully functional.
- SEPA debits
In order to keep using the debit procedure, it will initially be necessary to apply to the Bundesbank for a creditor identification number. A distinction must also be made between basic direct debits and company-to-company direct debits, the latter not being allowed in transactions with end users. For example, these procedures are distinguished by their respective pre-notification periods and return conditions.
Note: Existing direct debit authorizations can be turned into SEPA direct debit mandates if there is a valid direct debit authorization left over from the past and if the customer is informed that it will continue to be used. For new customers, a written and signed SEPA direct debit mandate is required.
Moreover, a system should be set up in which the creditor receives prior notice in a timely fashion before the debit is credited. This could be done on the invoice, which could also indicate whether the debits will be recurring.