Structured Creditor Reference
In order to be able to accurately allocate a transaction, both the payee (creditor) and the payer (debtor) require a reference in payment of a SEPA credit transfer or direct debit. This reference can be structured with XML tags or consist of an unstructured continuous text with a maximum length of 140 characters. It can contain an invoice number or a contract number and serves as a reference for classifying each individual transaction. To prevent typing and spelling errors in unstructured payment notes, the European Association of Corporate Treasurers (EACT) has developed codes to ensure end-to-end data processing in the SEPA scheme. This includes the Structured Creditor Reference, which can be used as an aid against typing errors in longer invoice numbers or similar. This facilitates the processing of data in data interchange, financial services and other business sectors. Other types of Creditor Reference are the Beneficiary Reference and the Document Reference.
The Structured Creditor Reference consists of a maximum of 25 characters, which are made up of the designation “RFS” for “Reference Structured”, a two-digit check digit and the alphanumeric Creditor Reference with a maximum of 21 characters. This can contain, for example, the invoice number of the creditor or the customer number of the debtor specified by the creditor. The check digit is used, among other things, by the payee’s bank to validate incoming payments. If the Creditor Reference of the transaction ordered by the payer does not match the Creditor Reference stored under the check digit, the transaction can be rejected by the banking institution as long as no further, structured purpose is stored.
Advantages of the Creditor Reference
The Creditor Reference is anchored by the creditor for the intended use of a transaction so that it can be assigned more quickly. It has been defined in accordance with ISO standard 11649, which specifies the elements of the Structured Creditor Reference. With the help of the Creditor Reference, a company can automatically match its remittance information with its customer accounts or receivables. Instead of a simple invoice number, the payee specifies the Creditor Reference, which can be matched directly to the receivable accounts when the payment is received. This improves the end-to-end data processing of the payee’s financial supply chain. One advantage of the Structured Creditor Reference secured by the check digit is that it protects against incorrect intended uses due to the check digit used. These can be caused by typing or spelling errors on the part of the debtor when settling a payment. Since an incorrect Structured Creditor Reference is rejected by the creditor’s banking institution, this saves additional work on the part of the payee, since no undefinable payments can be received.
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