Bank Reconciliation with SEPA Direct Debit
To reconcile or not to reconcile your bank account, it’s not a question.
When choosing a Payment System, don't create a new problem
It’s often the case when choosing a payment system in order to collect money that there’s more of a focus on how the paying customer will use it and the fees involved. That’s normal as it’s critical for the payer that the system is easy and convenient to use and it’s vital that it doesn’t cost a fortune to the merchant receiving the funds. However, while resolving one problem it’s important that another isn’t created as a result.
People working in Credit Control know that an efficient means of getting paid is important to keep cash flowing and to control the debtor book. They’ll appreciate the efforts of their colleagues in Sales and Marketing but they’ll be acutely aware that invoicing is only truly beautiful when customers pay those invoices on time, every time. Where that balance is not maintained, perhaps due to a renewed push in Sales driving an increase in invoicing without due attention on collections, the workload for Credit Controllers can increase along with the debtors.
As well as managing the debtors book and ensuring customers pay on time there is the important task of reconciling the bank account and allocating payments against invoices. This piece can easily be overlooked upfront during the excitement of introducing a new payment option to customers.
Yeah, this is a pain but we run a report that itemises the fees per transaction and we cross reference it with the invoice from the payment provider to ensure the amount received tallies which then allows us to allocate the payment against the invoice.
Take an example
So the invoice is sent, the customer pays, all is good. Not quite. With many payment systems the customer makes the payment (say it’s for €100 to use a round number), the payment provider makes the magic happen and funds are duly credited to the merchant’s bank account. However, the fee for the payment service has been taken along the way. So the invoice amount (€100) is not the same as the amount landing in the bank (say it’s €98.25 accounting for a % fee along with the transaction fee). It’s common to hear “Yeah, this is a pain but we run a report that itemises the fees per transaction and we cross reference it with the invoice from the payment provider to ensure the amount received tallies which then allows us to allocate the payment against the invoice”. A modern day version of Ulysses, RIP JJ. They’re typically sitting down when they remind themselves of this process.
Be fully informed
It doesn’t always need to be this way. With SEPA direct debit the amount invoiced and debited from the customers’ accounts is what gets credited to the merchant’s bank. There are no fees taken off the top. People experienced in Credit Control know this equation intimately and the value of simple reconciliation. Yes with SEPA direct debit the credit to the bank account is a bulk collection where funds being collected are from one or many customers on that same date, but it’s easy to identify who made up that credit. Taking the unique credit reference from the bank account, it’s simply a matter of running a report to isolate the collections based on this reference. From there it’s the wonderful task of ticking off all those sales invoices that are paid.
Here at DebaPay our fees are not deducted from the funds being collected meaning what is debited from the customer is credited to the merchant receiving the funds.
Our customers recognise and enjoy the benefits here, if you’d like to learn more about how the system simplifies the life of a Credit Controller, do get in touch.