Leading software provider Advanced Business Solutions is urging UK companies not to ignore new EU legislation that will cause significant changes to the way banks process payments in euro currency denominations. The Standard European Payment Area (SEPA), which will become part of European law on August 1, will affect all financial transactions in the EU and means businesses will be required to make a number of key changes to their finance systems before the go live date.
SEPA is a new standard for the processing of bank transactions, and affects all credit transfers and direct debits that are denominated in euros. While the UK is not a Eurozone member country, any business making a cross border transaction will still be affected by the change.
The go live date had initially been pencilled in for February 1, but EU lawmakers delayed the date after it became clear many companies across the Eurozone were not ready.
Ahead of the migration to SEPA, UK businesses will need to use new bank data formats, termed BIC and IBAN, to identify their bank and their account, rather than the national sort codes and account number currently in use. They will also need to ensure their payroll and accounting software is SEPA compliant, and that their providers have programmed in the changes required to make or receive euro payments.
Simon Fowler, Managing Director at Advanced Business Solutions, said: “UK companies really need to make sure they are ready for the revised deadline date and this means speaking not just to their bank, but to their software provider as well. We have already made extensive changes within all of our finance systems to meet the requirements, particularly around the direct debit process.
“We are now advising all our customers to start collating bank account information and to input that data sooner rather than later. We are also advising that they speak with their own banks to find out how they are implementing the changes, the timescales involved, and the compliance and training required.
“If an organisation is using a finance system which is not able to cater for SEPA, it may indicate a need to review or to ascertain the software vendor’s plans and associated timescale for being able to handle SEPA payments.”
By planning well in advance of the August 1 deadline, there will be less scope for unexpected errors. Advanced’s programmers have already discovered that different banks are interpreting the new SEPA file formats differently.
Added Fowler: “One problem we have already noticed is that the ‘standard’ layout is not being interpreted in exactly the same way by all banks. Although the main structure of the files may not change we have found that the validation rules supplied by the banks differ. While this is not a major problem, this could hold up key payments if businesses leave their planning to the last minute and such issues remain unaddressed.”
After SEPA has been successfully implemented, it will be possible for any business based in the EU to make euro-denominated payments between any EU bank accounts simply, and without cost, although non-euro currency conversion fees may still be applicable and affect UK businesses.
The ultimate aim of SEPA is to improve the efficiency of cross-border payments and turn fragmented national markets for euro payments in to a single domestic model. SEPA will enable customers to make cashless euro payments to anyone located anywhere in the EU using a single bank account and a single set of payment instruments.