Payment order

What it means

A payment order is an instruction from an account holder to the bank to transfer a set amount from its account to the payee's account. It contains mainly the payee's IBAN, the amount, currency, execution date and payment identifiers, in Slovakia traditionally the variable symbol, possibly a constant and specific symbol or a payer reference.

Euro payments within Europe are made as SEPA transfers with uniform rules and timelines. A standard transfer reaches the payee by the next business day at the latest, an instant payment within seconds. Payments to countries outside SEPA or in other currencies go through the SWIFT network and can take longer and cost more.

Orders can be entered singly or in bulk, for example as a file from the accounting software. Recurring payments of the same amount are handled by a standing order, and payments collected by the payee by direct debit. Who may enter and approve orders is set by the mandate and signing rights configured at the bank.

How it works in practice

In companies, payments are usually prepared in the accounting software from unpaid invoices and sent to the bank as a bulk order. This reduces the risk of errors from retyping IBANs or amounts, and payments are matched to invoices automatically. Before sending, it is worth checking that they match what was approved.

Security rests on segregation of duties: one person prepares the order and another approves it in the bank. Banks allow limits, dual signatures or approval by amount. In small companies the director usually approves payments personally; in larger ones the rules are set out in a signing policy.

For foreign payments you need to set who bears the charges: the payer, the payee, or shared. Within SEPA charges are shared automatically. For payments in another currency, watch the bank's exchange rate, which can be noticeably worse than the market rate, and compare it with offers from specialised providers.

What to watch out for

The biggest risk is a fraudster changing the bank account. An attacker sends an email that looks like it comes from a supplier announcing a new account, and the company pays into the attacker's account. Every change to a supplier's IBAN must be verified by phone on a known number, not via contact details in the same email.

Once processed, a payment order usually cannot be recalled, and money sent in error is returned only with the payee's consent. With instant payments there is practically no time to stop it. It is therefore important to check details before approval and, for new payees, to start with a small test payment.