Many corporates are either making good progress towards SEPA compliance, or are almost complete. The SEPA conversation has somewhat shifted from SEPA compliance to process improvement. Sure there will be a period of teething while the new SEPA process settles down, but your corporate Euro zone payments and collections landscape should look fairly similar now. This posts will set the scene for subsequent posts. Firstly highlighting the status of your SEPA compliance project, then outlining what you might consider next.
SEPA Compliance – Current Status:
Most corporates / Small-Medium Enterprises (SME’s) have continued to utilise their existing staff and process structures, but ‘simply’ switched the processing from legacy to SEPA.
The various teams should be doing one of the following:
- Capturing bank details for all suppliers and customers in the BIC and IBAN format
- Handling Euro currency payments within the Euro zone using either:
- A ‘legacy’ format that has been updated to include BIC and IBAN
- The ISO 20022 XML (PAIN.001) format for payments
- A payment service provider who is converting your payments into SEPA Credit Transfers
- Managing Euro currency direct debit collections within the Euro zone using either:
- The SEPA CORE collection scheme
- The SEPA B2B collection scheme
So now, lets think about where and how the above SEPA processes will be happening…
- In each of the 17 euro countries:
- Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Monaco, the Netherlands, Portugal, Slovenia, Slovakia and Spain
- Within each country, each and every business unit will be making payments and collections using SEPA, most likely with the existing (legacy) bank partner and using the same bank accounts
- Within each country, there will be at least 1 ERP system – but I bet you can easily count 5 ERP systems (Oracle, JD Edwards, SAP, SAGE, an in-house system…the list continues) across your impacted countries
- Within each country, you will be paying your employees using SEPA and it is highly likely each country is using their own payroll provider and / or system
When you look at it like this, you’ll start to see that actually across the SEPA zone you have the same payments and collection process being replicated many times within your organisation. You have multiple teams doing almost exactly the same thing, i.e. making payments or collecting via SEPA.
SEPA Compliance, What Next?
The following list is by no means complete but it highlights some opportunities. How many, and how far you want to take these is entirely up to you. Given that you’ve done a lot of the hard work to ensure SEPA compliance, it would be a shame to stop now and not reap some of the benefits. I will cover each of these in further detail in future posts:
1. Streamline your payments process:
We have already described how most corporates have rushed towards compliance, and now the SEPA process is being duplicated within their business. The SEPA process to make payments and direct debits collections should be very similar (same cut off times, r-transactions) across your business, so the old rule of having these processes run in-country because that is where the knowledge of the process resides is no longer true. Many corporates have centralised some processing into a Shared Service Centre (SSC), but with SEPA maybe this can go further? With the implementation of a standardised payment process there are some obvious streamlining opportunities. Is it really necessary to continue running SEPA processes in multiple locations?
2. Reorganise your IT:
You no longer need to maintain and support multiple payment and collection processes. Now you have one’ish (!!) SEPA payment process, and two’ish 😉 SEPA direct debit schemes. The formats should be very similar across your SEPA impacted countries. This should reduce the cost of your IT staff who no longer need to manage multiple national payment formats and business processes. Is it really necessary to continue running SEPA related IT functions in multiple locations? Are there opportunities to implement your SEPA process in other locations?
3. Improve Cash Management
In theory, with SEPA you only need one bank account! I’m not completely on board with that, but with SEPA there are definitely opportunities to reduce the number of banks you’re working with. There will also be opportunities to reduce the number of bank accounts. With SEPA you should be able to better manage your cash management set up. This should improve liquidity and result in a simpler cash management model and process. Question, is it really necessary to maintain all of your existing bank relationships, and continue to use all of your existing bank accounts?
4. Payment Factory
Everybody is talking about implementing a Payment Factory , but do you know what a Payment Factory is? Everyone you talk to has a different opinion and definition of a payment factory. I have a post coming up on this very soon – watch this space! Question, what the heck is a Payment Factory? 🙂
I felt it was important to mention some of the other buzz words / phrases that have been flying around. Terms such as improved reconciliation, and virtual accounting – I will be covering these in plain and simple English soon…!
Having achieved SEPA compliance, let me know if there are other SEPA opportunities or benefits that you have heard about that you would like me to cover…