SEPA

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SEPA Migration: Compliance and Catalyst for Financial Optimisation While it may appear that SEPA dominates the treasury media as we lead up to the final migration deadline, treasurers and finance managers have different levels of awareness about its implications and the opportunities that SEPA is creating.

SEPA Migration: Compliance and Catalyst for Financial Optimisation

An Executive Interview with Markus Straußfeld, Head of International Cash Management Sales, UniCredit Bank AG

While it may appear that SEPA dominates the treasury media as we lead up to the final migration deadline to SEPA, treasurers and finance managers have different levels of awareness about its implications and the opportunities that SEPA is creating. In this Executive Interview, Markus Straußfeld reviews progress to date, and how SEPA is proving a catalyst for new solutions both within and beyond the Eurozone.

With only a few months now remaining until the SEPA deadline, how far have corporate treasurers and finance managers progressed towards migration?

Companies are at different stages in their SEPA migration projects, and inevitably, some are better prepared than others. Some still underestimate the scale of the project and have not yet prioritised SEPA migration, and this is clearly a cause for concern. Mid-cap companies in particular may be less familiar with the nature and scope of SEPA than their larger peers: in some cases, for example, we have found that finance managers were not aware that SEPA applied to domestic as well as cross-border transactions.

Companies of all sizes are feeling the pressure, however, and treasurers are seeking clarity on what needs to be done to meet the deadline and to find out the ways in which we can support them and alleviate pain points. This includes seeking our advice, expertise and implementation support, but also solutions to ease the migration process, such as mandate management solutions, so we partner with key solution providers to deliver this. SEPA Direct Debit (SDD) implementation is particularly challenging, especially for companies with a large volume of direct debits under existing domestic schemes. SDD is less mature than SEPA Credit Transfers (SCT) and there is a lack of clarity over legal and operational issues such as mandate management and handling, particularly when converting from well-established local schemes such as in Netherlands, Austria etc. The final format specifications for SDD hav not yet been released by CGI (Common Global Implementation) Group which is adding to the pressure on corporates as the 1 February 2014 deadline approaches.

To what extent have companies been able to leverage the benefits of SEPA so far, in addition to focusing on migration?

Centralisation of payments, collections and cash management, standardisation of processes and formats, and simplification of accounts and cash management structures are amongst the key opportunities that SEPA offers. Larger companies in particular recognise this, and SEPA is proving a catalyst for centralising processes into shared service centres which permits further efficiencies, such as implementing consistent payment and authorisation controls and automating processes. The challenge, however, is how to both ensure compliance and implement the benefits of SEPA given the shrinking timescales. While compliance must be achieved by the February 2014 deadline, companies can continue to implement efficiencies and take advantage of the resulting opportunities beyond this date. Consequently, many companies still have a mix of local and centralised activities and the process of centralisation and optimisation will be a gradual one.

A valuable opportunity that SEPA opens up is the introduction of virtual account structures. These are already familiar in countries such as United Kingdom and we are now seeing greater adoption in Germany to facilitate automated reconciliation and posting of collections. A virtual account number is held on each customer record so that although collections are received into a single account, the virtual account number, which is included in the remittance data, can then be matched with the customer record. This allows the convenience of a single account, but permits a high level of automation, so amounts can be reconciled and posted promptly to customer accounts. This enhances working capital management by reducing days sales outstanding (DSO), frees up customer credit limits more quickly and reduces the administrative burden considerably.

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