Cash & Liquidity Management
Published  7 MIN READ
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SEPA Deadline: Actions to Take Right Now

With the 1 February 2014 deadline for compliance with SEPA only five months away, and following clarifications from the European Payments Council (EPC) that there will be no postponement and no ‘plan B’, some companies are having to rethink their approach to SEPA compliance. PwC surveyed 150 companies in June as a follow-up to its January 2013 SEPA survey and found that more companies are actively working on SEPA readiness and that the understanding of the task at hand has improved significantly. However, we also found that 34% of companies are still at risk of not being ready in time. PwC SEPA specialists Bas Rebel, Jens Kohnen and Emiel Kuiken look at what action companies need to take.

According to the findings of the June update of our January survey, corporates still expect the 1 February deadline to be softened. Merely 20% of respondents believe that the regulators will strongly enforce the deadline and disallow legacy formats to be processed by the banks. The majority of the 47% expects a grace period (22%), during which banks will still process legacy formats or otherwise repair or convert (25%) the files to SEPA-compliant format. A few respondents (7%) expect an actual postponement of the official deadline.

Clearly there is inconsistency of views between companies and the regulators. If the corporate sector plans for a postponement that does not occur, this may lead to severe disruption of the international payment infrastructure. Our survey also indicates that corporates are sceptical about the readiness of their clients: approximately 40% expect that their customers will not be compliant in time. In the first few months after the deadline, companies should anticipate a slowdown of their cash conversion cycle by, say, up to 15 days, as clients may have difficulties in executing payments. This is an issue for companies whose margins are low and are therefore highly dependent on efficient working capital management. This could cause severe disruption to supply chains and increases in working capital requirements.