vrijdag 7 december 2012

SEPA: Standardise, Re-engineer and Rationalise Your Treasury


At the heart of the single euro payments area (SEPA) is the removal of barriers and requirements that previously restricted how euro payments and collections - and hence liquidity management - were conducted. With harmonised legislation and payment schemes, SEPA now provides organisations with flexibility to operate their cash management activities irrespective of the location of their counterparts, standardise their processes and rationalise their activities. While some barriers remain to complete portability of account location, SEPA can facilitate streamlined cash management and more efficient treasury processes.

The long-gestating single euro payments area (SEPA) project is becoming a reality as the 1 February 2014 migration end date approaches. Prior to SEPA, domestic payments and collections necessitated accounts to be held within the country of payment, while payments were executed in accordance with national rules, standards and timeframes. For the organisations receiving and initiating payments, these requirements led to local bank accounts, duplicate processes and varying technical configurations, in addition to general inefficiency and cost. 

SEPA enables clients to hold an account in any SEPA country, from which payments can be made to, and collections received from, the 32 SEPA countries. As a result clients will, in future, hold fewer euro accounts within the SEPA region. To ensure that these efficiencies are achieved in full, organisations will need to assess their existing account profiles and consider a number of implications, including reconciliation and control, central bank reporting, and possible legal and tax implications. This reduction in accounts will in turn help support liquidity optimisation, improve working capital for treasurers and aid centralisation efforts.

On the payments side, SEPA is enabling the standardisation of payables set-up and processing. National automated clearing house (ACH) payments are being replaced by SEPA credit transfers (SCTs), thus creating for organisations a single payment mechanism across 32 countries for euro payments, eliminating many local country rules, enabling a single payment type to be used and facilitating the remittance of additional payment information. Those using SCTs today are benefiting from very high rates of straight-through processing (STP) as the schemes have been designed on this basis. The main organisational payment flows, of vendor, payroll and tax, are each migrating at their own pace to SEPA. By 1 February 2014, all these flows will be processed via SEPA and clients will be able to benefit from consistency in processing across their organisational flows, via either SCTs or SEPA direct debit (SDD) payments. 

SEPA presents an even greater opportunity for organisations to reconfigure their collections activities across the region. Historically, to facilitate incoming payments from customers, collections accounts have been predominately held in-country. National direct debit schemes have significant variances in rules and refund rights, mandate processes and value dates. As a result, accounts receivable (A/R) processes are less often centralised into shared service centres (SSCs), and less standardised than accounts payable (A/P) activities. 

The SDD scheme offers an opportunity to standardise all euro direct debit activity, replacing the multiple standards and rules with a consistent approach that enables euro collections across the 32 SEPA countries. The possibility of collecting into one single account has been facilitated by SEPA. However, again, some challenges to this remain before this will become a common practice.

Element of Choice

With two SEPA direct debit schemes, organisations can choose between:

  • A core scheme (mandatory for banks to offer, and providing debtors with refund rights up to eight weeks).
  • A business-to-business (B2B) scheme (optional for banks, and debtors to waive their refund rights).

While adoption of SDDs has been low to date, recent legislation ensuring the validity of existing mandates for migration to the SEPA core scheme, alongside the 2014 migration end date has brought increased focus to this area. Companies should be aware that migration to the SDD requires more than just bank identifier code (BIC) and international bank account number (IBAN) collection. Ensuring each mandate is assigned a unique mandate reference number and changes to payments systems to facilitate new collection cycles are also required. Furthermore, under SEPA, creditors have full responsibility for maintaining direct debit mandates. Therefore, depending on the volumes involved and the complexity of existing setups, some clients may consider outsourcing the migration of direct debits and/or on-going migration management.

For organisations that operate decentralised payments and collections structures, SEPA inherently offers a greater opportunity to rationalise, standardise and centralise. However, centralised organisations can also gain process efficiency benefits and seek further optimisation through account rationalisation and the use of the new data fields contained in SEPA messages. SEPA messages contain new fields that help facilitate payments on behalf of/receivables on behalf of (POBO/ROBO) activities and the transfer of additional information to beneficiaries. Organisations should assess, for payments and collections, how they can utilise these new fields to increase reconciliation and support in-house bank activities.

With these opportunities in mind, organisations also need to be aware of the current state of country market readiness. While 1 February 2014 is the set end date for all euro member countries to migrate to SEPA standards, certain national bodies, such as in the Netherlands, require sections of their communities to migrate in advance of the legislative end date. Alongside this, the national market readiness to process all types of payments, certain local legislation and the use of local payment instruments, such as cheques and cash, may place some restrictions on the level of account rationalisation. However, these challenges should lessen over time.

SEPA is bringing significant change and will have an impact on the payments and collections activities of organisations in both the short and the medium term. Rather than having a tactical view of the SEPA deadline, corporates can view this requirement as an opportunity to further rationalise their cash management and banking infrastructure. Understanding the SEPA schemes, and the opportunities that are available for your organisation, is key to determining how to approach SEPA.

Bron: Gtnews

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