What is SEPA, and why does it matter for your business?
Back when the powers that be introduced the Euro, they had a vision of easy cross-border commerce driving prosperity for all. Even though the currency has had its ups and downs, authorities are still striving towards that goal, with the Single Euro Payments Area (SEPA) the latest initiative.
Simply put, SEPA is a standardised way of processing payments that applies to 34 European countries, replacing national systems. It was due to come into force on February 1, but has since been delayed by six months to give banks and businesses more time to switch over. It’s unlikely that we’ll get another extension on the SEPA deadline, so it’s vital that your business is ready for the change this year.
SEPA is a simple system with a few modifications. SEPA Credit Transfer allows you to make euro electronic payments to domestic and cross-border beneficiaries. International Bank Account Number (IBAN) and Business Identifier Code (BIC) will replace national sort codes and account numbers as the key input information.
These numbers should be readily available on any bank statement. However, businesses and invididuals can work out their IBAN using sort codes and standard bank account numbers here. The standardised format should make electronic payments For a business to switch over to SEPA, therefore, you will need to obtain the IBANs and BICs for your employees and key suppliers if they haven’t provided them already. It is also a good idea to modify your invoices to include the relevant bank details.
Things are a bit more complicated when it comes to direct debits. If your business collects direct debits from customers, SEPA Direct Debit brings changes including new file submission time frames, new customer file formats, and a new automated process for rejected or returned transactions.
Of course, the IBAN and BIC will replace national sort codes and account numbers used for direct debits. Beyond this information, any direct debit mandates will need a creditor identifier, the debtor name and address, the creditor’s Name, address and postal code, the type of payment (whether one off or recurrent), the date of signing the mandate, a unique mandate reference (UMR) and approved Legal Text. Your direct debit service provider should be able to advise you of any changes you need to make, but you can download an in-depth guide to the new regime here.
The SEPA transition should be a positive step, even if it comes with some confusion for consumers and businesses. If you haven’t already laid the groundwork for a SEPA switchover, you should advantage of the extended deadline and get ready now to avoid disruption. If you need assistance in getting your company SEPA-ready, you can contact us for an initial, no-obligation meeting.