Better late than never: businesses should still sharpen up for SEPA
Jean Beaufort is managing director, SEPA and worldwide bank relations at Sage.
The deadline for compliance with SEPA – the single Euro Payments Area legislation – extended in a ‘transition period’ till 1 August 2014 – is officially upon us as of 1 February. Countries within the eurozone will already be generally familiar and compliant with the legislation (although there have been laggards throughout the eurozone, our research has shown).
However in the UK, not all companies understand that if they do business with suppliers, subsidiaries, partners or customers in the eurozone that they will have to become compliant with this EU initiative as well – indeed, they should already be, writes Jean Beaufort.
While many large organisations (both public and private sector) have already planned and delivered their compliance, smaller and mid-sized firms have woefully underprepared for the deadline.
Banks and payment organisations need to be prepared for a certain amount of confusion and resistance from UK customers who may not understand the reasons for the change, and may be reluctant to put the necessary changes into effect.
Calm before the storm
Smaller customers with financial interests and commitments in the eurozone should be able to adapt before the final 1 August deadline if they begin promptly – assuming they don’t have high volumes of accounts to amend and extensive bespoke software like ERP to upgrade. Midsized firms who have not begun to make the necessary changes to their accounting and finance functions and software tools will be in contact with their banks when their payments to staff and partners in the eurozone are not processed after the deadline, and will have a bigger challenge to overcome.
The ‘Second SEPA Migration Report’, published October 2013 by the European central Bank claimed that “New information available to the Eurosystem since the publication of the first SEPA migration report confirms that many stakeholders have decided to migrate only in the last quarter of 2013, or even later. This approach gives rise to operational risks and limits the possibilities of tackling any setbacks or unexpected developments during the changeover.”
The report continues, “. Migration will require considerable effort and strong cooperation among stakeholders.”
Therefore banks need to be prepared for further customer support queries as the new transition period’s deadline approaches.
How to help
Technical banking advice for customers should emphasise that the cash management department will see a change to its roadmap that will initially be IT-related with the management of the SEPA standard (UNIFI XML format) and for several countries the use of new bank protocols (SWIFTNET and EBICS, etc.) based on IP standards with a high level of security in accordance with the banking relationship.
However, this change also comes from the impact of SEPA on the operational management of daily financial flows and on the organization of cash management functions. In fact, from methods of payment, invoicing and receipt processing right through to the organization of the banking partnership structure or the bank reconciliation, European cash management is changing with the implementation of SEPA. British firms that transact heavily with the eurozone would be advised to take note.
Given the functions in question, SEPA is not simply an IT project, but a business project involving a variety of functions. Within the sales function, the traditional domestic direct debit authorizations will need to be replaced by the single mandate established by SEPA and this mandate will also need to be managed (collection, archiving, evidence, etc.).
It will be necessary for the marketing department to update documents, annual reports and other websites. Customer and supplier repositories must be amended to include the BIC and IBAN, the new banking references that are standard in the SEPA zone and that replace the traditional RIB. Human resources departments will need to do the same with respect to employee banking information and payslips because credit transfers will be made in SEPA format. Legal departments will need to amend all contracts in line with SEPA (conditions of sale, dispute tribunal, etc.).
From the perspective of the IT director, SEPA, which uses XML language, has a significant impact on information systems. It will be necessary to update all systems and software, provide access to remote users, or even open up the IP address to the banking connection to ensure secure access.
Banks must ensure their midsized customers just starting on this journey understand that their first task is to nominate a SEPA project committee or manager with an overall vision of this project within the company. They should be responsible for analysing the impact of SEPA on existing processes, involving the company’s services that will be affected and monitoring developments in the transition to SEPA by developing a banking strategy and contacting the company’s service providers, software suppliers and banks as soon as possible.
Subsequently, all of the company’s services affected by SEPA must be identified, all data flows concerned must be mapped and the impact on the internal organization and information systems must be measured.
With regard to this last point, it is very important that applications that are able to support and manage XML formats are identified. If necessary, budgets should be set for the new IT tools that are required (information system, user software, etc.) and thought given to the subdivision of this project. In this scenario there are two options: either to implement conversions or translators to enable the systems to be changed coherently in line with a plan and a budget or to proceed with the replacement of all applications in one go.
Taking into account all the tasks that must be fulfilled, it is also a good idea to list all the necessary resources for the SEPA implementation, such as IT personnel, coordination between different services, new countries and entities to be included in the project.
While UK banks are on track, having prepared their systems over the past few years, UK banking customers with financial transactions in the eurozone who remain unprepared now have a grace period to get their businesses in order. Banks too now have extra time to lead those customers who trade in the eurozone into compliance.
