SEPA, the so called Single Euro Payments Area, is a combined effort of the EU governments, the European Commission and the European Central Bank to create one integrated payments market across Europe for all organizations or individuals making or receiving payments. By replacing today's fragmented national payment systems with a single set of SEPA standards, organizations and individuals will be able to make payments to anyone within the area through their existing bank account using standardized payment methods.

The European institutions have agreed on a deadline of 1 February 2014 for the phasing out of domestic credit transfers and direct debits, and moving to SEPA. Banks will only be able to accept SEPA credit transfers and SEPA direct debits. This deadline applies to all EU member states in the Eurozone, whereas member states outside the Eurozone have until 31 October 2016 to migrate to SEPA. An important feature of SEPA standardization will be the move from present day account numbers to a new account ID in the form of the International Bank Account Number (IBAN) and the Bank Identifier Code (BIC). Systems need to be adapted to be able to process SEPA payments and adjusting direct debit mandate forms.

SEPA will enable consumers to pay domestically and cross border throughout the whole of Europe. Customers will be able to pay invoices and directly debit accounts in the SEPA area from a single bank account improving customer safety and security. Additionally they will be able to reach all accounts SEPA-wide from one home country account. It is also expected that a uniform payments market is beneficial to competition, which can result in better products, greater efficiency and lower costs.  The European institutions hope to have created an environment for enhanced competition in the provision of payment services rules to benefit both, organizations and individuals.

For small medium enterprises, SEPA promises to offer faster settlement and its simplified processing will improve cash flow and reduce costs. For large merchants and corporates, common standards enable the assembly of one standard platform for payments in the whole of Europe resulting in major savings.

The two main SEPA products are the Credit Transfer and the Direct Debit. Each of these product schemes will impact companies' financial supply chain in multiple ways. For businesses the challenge of migrating to SEPA will be to complete the integration process without any loss of information or control.

SEPA DIRECT DEBIT requirements will impact collections, credit and risk and mandate management. It includes restructuring of existing direct debit processes and procedures, in which all mandates, are migrated to SEPA standards. There are two versions of SEPA Direct Debit; the B2C and the B2B. The differences however are rather minor.

Here is a basic list of the steps which will need to be taken:

• Banking and accounting software must support the technical messaging standards used for SEPA Payments (ISO20022 - XML)
• Get the BIC/IBAN of all your customers and suppliers
• Print your BIC & IBAN on ALL your business papers (not only for cross-border business).
• Identify any optional or AOS (Additional Optional Services, which are services a bank can offer in addition to those in the SEPA Rulebooks) that have been implemented in your country.
• Consolidate the local and cross-border payments in one SEPA system.

Are you ready? Remember, transactions in old formats will not be processed by the banks after February 2014. In other words:  if you are not ready, you can’t pay or be paid anymore.