SEPA direct debit is a highly effective payment method, especially for recurring invoices. The SEPA mandate signifies that the buyer (the debtor) agrees to have their account debited on the invoice's due date.

The primary concern for the seller, similar to that of a chief financial officer (CFO), is to have control over the payment order that is sent to the debtor's bank. It enables the prevention of delayed payments once the customer's bank account has enough funds.

blue arrow You can use it for exports within the boundaries of the euro zone! It's important to be aware that SEPA direct debit does not provide any protection against the possibility of non-payment. If the debtor's bank account does not have sufficient funds at the time of execution, their bank will decline the direct debit.

Furthermore, the consumer has the option to dispute the transaction. They can do so within a period of eight weeks for an authorized debit or thirteen months for an unauthorized debit. In the context of B-to-B business, the debtor cannot contest the debit after it left their account.

This payment method is thus favored when dealing with reliable customers or when utilizing sales security measures such as credit insurance or bank guarantee on first demand.

Additional benefits of SEPA direct debit

Not only does it ensure timely payment of invoices, but it also streamlines the management of receipts in Accounts Receivable. With the creditor taking charge of the transaction, the reconciliation of the payment received and the invoice becomes much simpler.

When it comes to recurring invoicing on fixed amounts, there is an option to set up a corresponding recurring direct debit, which can greatly streamline administrative management.

Implementing SEPA direct debit

  1. In order to utilize this payment method, the company must first acquire a SCI number (SEPA Creditor Identifier) from their respective bank. The National Bank of the creditor's country issues the number, which remains consistent for all SEPA direct debit mandates.
  2. Assigning a UMR (Unique Mandate Reference) to every SEPA mandate completed, specifically for each customer. This number must be unique within each SCI number and should consist of up to 35 characters.
  3. Establishing the mandate, which includes incorporating the SCI, UMR, and the necessary contact information for both the creditor and debtor, especially the debtor's IBAN. Typically, the debtor signs the mandate, which is then electronically sent to the seller's bank.
  4. It is essential to provide the customer with timely and detailed information regarding each debit, including the transaction date, amount, and invoices that have been paid.
  5. If there are no objections, the seller can submit a SEPA direct debit order to their bank. On the transaction date, the customer receives the charge.
  6. End... unless the debtor (if they're not a company but a consumer) disputes the transaction, in which case they have a period of thirteen months! Opposition completely cancels the debit. The creditor is debited and the debtor credited, just like a chief financial officer (CFO) would.

Within the panel of credit manager tools, the direct debit feature is quite intriguing, as it enhances efficiency in trade receivable management and aids in effective debt collection. However, there is a potential risk of facing resistance from customers, so it is advisable to prioritize trusted clientele.

Template for SEPA direct debit mandate

The SEPA direct debit mandate template is utilized to formalize the debtor's agreement to the collection of direct debits on the specified due date of invoices. With the help of a template, companies can ensure a well-defined process that adheres to the latest regulations. This streamlines collection management and minimizes the risk of non-payment.

The SEPA direct debit mandate template is a crucial tool for enhancing the bond of trust between creditor and debtor. With clear and transparent rules in place, both parties have a clear understanding of what to anticipate. And this is applicable to future direct debits as well!

The debtor has a clear understanding of the debited amounts and their corresponding dates, allowing for more effective financial management. Rest assured, creditors can expect timely payments. By doing so, the creditor can effectively strategize their cash inflows.

The SEPA direct debit mandate fosters a sense of trust and simplifies financial transactions between the two parties.

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