SEPA

What it means

SEPA is the single euro payments area: a transfer to another participating country runs on the same terms and at the same price as a domestic one. The IBAN is its foundation.

It covers the euro area and other states that joined. Outside SEPA, payments run through SWIFT with charges on both sides and slower crediting.

SEPA covers payments in euro only. A transfer in Czech crowns to Czechia is not a SEPA payment, even though Czechia is in the SEPA area, and the bank handles it as a foreign payment with conversion and its own fees. A company paid in another currency therefore needs a foreign currency account or at least a clear view of the rate at which the bank converts the amount.

How it works in practice

For a company it means one account for all of Europe instead of one per country. It simplifies the books too: one statement, one currency, no exchange differences inside the euro area.

SEPA direct debit collects from the customer’s account under a mandate. On recurring services it shortens collection time more than any reminder ever will.

Foreign customers paying by SEPA transfer often do not fill in the variable symbol the way Slovak payers do, but put the invoice number in the note or reference field. When matching payments in the ledger for clients with European partners we therefore check those fields as well, and ask customers to always quote the invoice number in the same place.

What to watch out for

A euro payment to a country outside SEPA is not a SEPA payment even though the currency matches. Charges then follow the agreed sharing rule, and less can arrive than the invoice stated.

With a standard SEPA direct debit the payer can ask their bank for a refund for several weeks after collection without giving a reason. A payment received by direct debit is not final at once, and a company that ships goods or pays out commission on the strength of it may later find the money is no longer in the account.