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Switchover to SEPA creates an urgent need for action

As of February 1, 2014, or taking into account the recently decided prolongation until August 1, 2014, all noncash payment transactions must be changed to the SEPA procedure from the current German procedures.

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.

  1. 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.
  2. 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. 
  3. 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. 
  4. 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. 
  5. 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.

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