SEPA What should you be thinking about?

SEPA What should you be thinking about? The Single European Payments Area - you re steadily seeing talk of it everywhere. The new financial structure for banking in the Eurozone will mean changes for every business, but do you know exactly what the new situation will mean for you? Here we present the practical information you need to get a grip on things, and take the right steps to make sure your business is ready. What is SEPA? From the first of February 2014 the Single European Payments Area will come into force. From that moment on, all payment traffic will be handled at a European, rather than country level. You ll be able to make both foreign and domestic payments from one bank account using one set of payment methods for money into and out of your account. Payments abroad will be cheaper, faster and more efficient. No need for separate accounts in other countries anymore. SEPA, your bank and your software As you might expect, these changes will have a knock on effect for your financial administration, even if you only operate in one European country. The move over to SEPA will have consequences for both your banking and your business software. Your bank needs to be able to handle new account numbers and payment and collection files that in turn need to be supported by your software. In most cases your supplier will run an update to ensure you re ready for the new files and have new data fields for IBAN and BIC codes in your account management system. Becoming SEPA-proof 4 steps in the right direction 1. Set and then share your own IBAN en BIC codes The most logical place to start is updating your business software with your own BIC and IBAN codes. If you don t know these already, you can obtain them from your bank, or use the IBAN and BIC service mentioned in step 2. Having done this, you then need to make sure that all your contacts have been informed about your new details, giving them enough notice to get their administrations ready in time. The more proactive you can be in getting the information out to the network, the more it will be appreciated. Don t forget that all your communications media also need to be updated. Your payment details will be in more places than you think, many of them not automatically updated by changes in your system master data! Compare the process with changing your company logo and the impact that has on invoice layouts, letterheads, pay slips, webpages, quotes, business cards However, despite the fact that the majority of the work will be done by your software vendor and bank, you will need to do some preparation yourself. As such, we ve outlined the five key steps to take into account when making your company SEPA proof, the main things to keep in mind, and the potential issues that need to be on your radar. The transition doesn t have to be a drama, provided you create a careful plan and give yourself enough time to complete the various activities required. page 1

2. Update all your contacts stored in your systems with IBAN and BIC data Having updated your own details, you then need to begin adding IBAN (International Bank Account Number) and BIC (Bank Identification Code) information for all suppliers, debtors and employees in your systems. In most cases, this is enriching their information by adding the new data, rather than replacing their old bank account number. If you don t already have fields to enter the information, contact your software supplier to discuss an update. Handy tool The Dutch banking industry has created a helpful tool to assist with this www.ibanbicservice.nl. Thanks to the tool s bulk upload functionality, you can use the site to generate IBAN and BIC codes for all your current bank account numbers in one go. Most software solutions will offer you the possibility to export all bank account numbers in one bulk file. This can be uploaded to the tool and used to create a new file that can be uploaded to your system to automatically update all your contact s data. Alternatively, you can also use the tool to create individual IBAN and BIC codes as necessary and enter them into your system manually. The bulk export functionality works in most cases by combining each of your existing bank account numbers with a unique identifier code for that contact. When the file is then re uploaded, the original bank number and identifier are joined by the IBAN and BIC codes. Your system then uses the combination of identifier code and bank account to place the new data back in the right contact card. Don t edit master data between export and import In order for this to work correctly, it s essential that no changes are made in your master data in the time between exporting and importing the bulk file. If changes are made to your contacts it s likely you ll see error messages telling you the account can t be found. Also take care to make sure you import your files back into the right database. Your original data may be out of date In addition, you may discover that on importing the new data, you see a message that the original bank account no longer exists. If you have old contact data from customers you ve haven t sold to in a while, it may be that their bank account has been closed or moved since you last did businesses. The import will highlight these cases as having invalid accounts your flag to update your administration with the right data. Don t forget - new accounts also need IBAN and BIC! Furthermore, remember that once you ve run a bulk update, any new accounts that are added need to have IBAN and BIC data included. If this isn t done, you ll need to run the bulk update again to ensure all your contacts have the necessary data for after 01.02.2014. Multiple software systems need careful attention Keep in mind that multiple systems involved in master data need to all be SEPA proof, and also be capable of sharing SEPA data. If your leading customer information system is updated, but doesn t feed into your other software involved in making payments, you will run into problems after February 1st next year. Ensure that all integration can also handle SEPA information. If you re unsure of what systems do what, or whether they can interact as necessary, contact your suppliers directly. 3. Over to a new payment file If you make frequent payments to other European countries in Euros, moving over to the new system as quickly as possible is going to save you time and money. In general, paying according to SEPA standards is for the most part work for your bank and software supplier. As part of this, your bank will be initiating changes to the format of the file you use to send them bulk transactions. You can find details of the move from CLIEOP03 to PAIN on their website, in addition to the date from which you can begin using the new system. It s then up to your software supplier to ensure that your solution can work in line with the new payment files. As such, you really only need to ensure that you ve got the relevant update for your solution, that SEPA has been activated within it, and that the right checkboxes have been ticked in your payment file creation settings. Payments to countries outside of the SEPA region will continue to use the BTL91 format. Although the majority of the work here does not involve you, it s important that you make sure there is a match between your software system and the functionality offered by your bank. It could be that they do not support the same type of PAIN payment file, leading to problems when you begin trying to use the new setup. Ask your bank which PAIN version they support and double check with your software vendor to see if any additional action needs to be taken. page 2

4. Over to the new collection system If you use the direct debit system to collect money from your customers this final step will involve the most work for your business. New contract The first thing to do is to sign a new European collections contract with your bank. This will then allow you to obtain your Creditor ID, the unique identifier for you as a business using direct debits to obtain fees for your products or services. Choice of collection type Once you have your Creditor ID, you ll need to make a choice regarding which of the two new SEPA collection methods you are going to use core or business to business. Businesses are free to use either. The main difference between the two lies in the right to recall money collected from an account. With the core process, the right of recall has been extended to 8 weeks from the date of collection. However, with the B2B process, debtors will not be able to recall collected money at all. As such, existing direct debit mandates can be passed to the core system without the need to have them resigned by the customer. However, as the right to recall collections is removed with the B2B process, existing mandates must be renewed with the customer before being submitted in an instruction to collect at your bank. Variations in time frames Although both systems require you to give 14 days pre-notification of intent to collect to the debtor (you re free to do this as you wish providing you supply the date and the amount), the core system requires a longer notice period at your bank when you set up a direct debit. New instructions to carry out a core direct debit (i.e. the first collection file for a new mandate) need to be given to the bank 5 days before the money needs to be collected, with the subsequent instructions to collect then given 2 days in advance. As such, keep in mind that new mandates for core direct debits need to be reported to the bank earlier than with the current system. For B2B collections, both the initial and subsequent direct debit instructions can be provided 1 day in advance. Supplying the direct debit files to your bank key information In the new core system, the following information for both new and ongoing direct debits needs to be included in every instruction to the bank to collect: - Your Creditor ID - The direct debit mandate reference number - The IBAN of the debtor - The date the agreement was signed (use 01-11-2009 for already existing direct debit mandates all banks have agreed on this as a dummy date for existing mandates that will be continuing in the new system) For B2B direct debits, the debtor needs to sign a new collection agreement that also needs to be registered at their bank (your debtor needs to do this themself ). The following information needs to be supplied with every instruction to your bank to collect: - Your Creditor ID - The direct debit mandate reference number - The IBAN of the debtor - The date the agreement was signed Furthermore, please be aware that the B2B collection will not be supported by every bank important to note given that the banks of both collector and payee must support the system for the collection to work. page 3

Changes to archiving legislation The major stumbling block for companies involves the upcoming regulations for storing your direct debit mandates. Under the SEPA regulations, it will be necessary to fully archive all mandates, in addition to digitally entering the core information from each one into your financial administration. This means that many companies will need to generate reports on their entire debtor overviews, in some cases having to manually enter large amounts of information from mandates into their systems. If existing, ongoing mandates are missing, new paperwork will have to be completed. In other cases, companies that do have this information stored digitally may have to work out how it can be collected and exported from one system into another. Whatever the case, managing this process is likely to be a significant undertaking and not to be underestimated. Our advice is to begin planning for this as soon as possible, giving you the opportunity to accurately appraise how long it will take you to get your house in order, and ensure you enough room to execute. 1st February 2014 is just the beginning It s also important to realize that this level of administration around collection mandates will have a major impact on your team moving forward. It s a new discipline that will require dedicated attention. Don t think that being ready for SEPA is the end of the road the rules mean ongoing changes that you need to be ready for. Don t realize this once it s already become a problem! Plan carefully who and how you ll manage the processes involved in the future. Furthermore, the verwinfo file generated by Equens to report on the details of a collection run to multiple debtors will be stopping. How banks will go about informing their customers on these details is not yet 100% clear. Some may opt to provide more detailed bank statements, while others may adopt a different approach. Again, we advise you to make contact with your bank and discuss the details with them directly. You can find more information about European collections on the free-standing web resource www.betaalvereniging.nl. Be pro-active Given that the precise extent of your migration project will be unclear, it s best to get started with your preparations early and not wait for 2014 before you get underway. You ll then make sure you ve got time to tackle any unexpected problems with your payment and collection processes. And remember that you can choose for yourself when you switch the period up until 1 February 2014 will support both the old and new systems. In addition to the information we ve shared here, the National Forum for SEPA migration (NFS) has created the Nationaal SEPA-migratieplan - a useful resource for any project group busy with getting their business up to speed for the new system. Knock on effects It s also important to keep an eye on related processes within your business software. A key area will be how your solution handles the reconciliation process for matching bank statement information to outstanding items. The standard file format used to create electronic bank statements is gradually changing, meaning that you may experience issues correctly pairing off your open invoices to the money in and out of your account. Be sure to contact your vendor to ask what they re doing about these changes and how they may affect you. page 4

Further information Key terms IBAN and BIC The move to IBAN and BIC is a key part of the SEPA adoption process. After February 1st 2014 your current account number will no longer exist. The combination of IBAN and BIC creates your new account number that can be recognized throughout the single payments area. Dutch IBAN numbers have 18 digits your current account number plus a country code, bank code and checking element, together with one or more 0 s. They can be used already, but will be mandatory after February 1st next year. SCT and European payments After SEPA has been introduced, you ll pay with the standard SEPA Credit Transfer. This new system does away with the distinction between foreign and domestic payments and ensures that all transferred are processed equally quickly. SDD and European collections The SEPA Direct Debit will replace the current incasso collection mechanisms. There are two variants: the standard European collection (Core) and the business collection (B2B). The two options involve different specific terms and conditions for both you and your customers. At www.exact.nl/sepa you can find more detailed information on the differences in one overview. Clieop03 and PAIN You probably already know Clieop03 as the format for payment files sent to your bank in the Netherlands. This format will no longer exist from 1st February 2014. The new format for files sending payment information from your administration is called PAIN. Both formats can be used up to 1st February 2014. BTL91 and PAIN The majority of foreign payments currently use the BTL91 format. All payments to foreign countries inside SEPA will use the PAIN format, while BTL91 will remain for payments to countries outside SEPA. You can find more information on www.exact.nl/sepa Handy websites - www.exact.nl/sepa - www.overopiban.nl - www.betaalvereniging.nl Exact Group B.V., 2013. All rights reserved. All brand names and trademarks mentioned herein belong to their respective owners. For more information, visit www.exact.com MCL610101EN407.1 page 5