IBANs consist of four groups of alphanumeric characters:

a)    The country code

b)   Check digits, calculated via an algorithm of IBAN

c)    The bank code

d)   The account number

IBANs can have more than 30 characters, although not all do. The exact length is set by each country’s banking sector, and all IBANs within a country must be the same length, reports the United Nations Centre for Trade Facilitation and Electronic Business.

The IBAN is being used as the primary means of identifying accounts in Europe; as a result, international payments without IBANs often take longer. If you will be paying an organization that’s located within Europe, you’ll want to make sure you receive its IBAN information. The IBAN Registry prepared by SWIFT also provides IBAN formats for several countries outside Europe, including Israel, Saudi Arabia and the United Kingdom. At the present, the IBAN is not being used for payments within the U.S.

Not sure about an IBAN? Several organizations offer online tools that payers can use to validate the structure of an IBAN.

At the same time, international payments can be difficult to complete. For starters, 81 percent of the survey participants said that payment patterns varied from one region of the world to the next. Because just about every country has its own payments systems and rules, standardization becomes difficult, says Adam Tiberi, senior vice president of global product management with Travelex. One-fourth of respondents said obtaining confirmation of payments and/or receipts was their greatest challenge when it came to international transactions, and 20 percent cited the lack of visibility into their cross-border payments and receipts. 

While companies can use SWIFT wires for international payments, they’re not cheap. Each bank involved in the transaction takes a small cut; by the end, a $100,000 transaction could result in fees of $100 to $150, Tiberi estimates.

To be sure, some signs of progress can be seen. Europe, for instance, now has the IBAN, or International Bank Account Number, a standard numbering system developed to identify bank accounts from around the world, Investopedia writes. It was originally developed by banks in Europe to simplify transactions involving bank accounts from other countries. The IBAN number consists of a two-letter country code followed by two check digits and up to thirty alphanumeric characters known as the basic bank account number (BBAN). Currently, the IBAN is primarily used by banks in Europe, Tiberi says.

At the same time, a number of financial service providers are developing their own applications for international payments, Tiberi notes. The goal is “to make international payments as easy as ACH,” and less expensive than SWIFT, he says. What’s more, many of the applications allow payers to include documentation, such as purchase orders, with their payments. That way, both the payer and payee have a better understanding of just what a particular payment covers.

The upshot? While the international payments environment is slowly improving, “this is still an area where a lot of businesses have challenges,” Tiberi says.

To be sure, the Bank Secrecy Act focuses (not surprisingly) on banks and financial institutions, requiring them to know their customers. However, the principles come into play with corporate AP departments as well. For instance, while you may be able to head to Staples to purchase check-printing software, you’ll probably also need to mail the company to get pre-printed forms to use for the checks, or you may need to buy special ink to create the checks, Rogers says. When you do, the seller will need to check your address and identity. “Software that facilitates payment cannot be made available for download unless the physical address and/or identity of the recipient is identified and verified,” according to information on www.checkwriter.com.

In 2006, Qchex, an Internet-based provider of checks, had to halt its operations. “According to the FTC’s court filings, before September 2005, Qchex offered and sold its online check services without making any effort at all to verify that someone ordering a check on an identified account actually had authorization to write checks to be drawn on that account,” the Federal Trade Commission reported. As a result, scammers could use Qchex to appear to pay for purchases of goods or services, although the unauthorized checks ultimately bounced. They also could use Qchex in overpayment schemes. That is, they would write a check on Qchex and overpay an invoice, before asking for the difference to be wired back to them. By the time the checks ultimately bounced, the scammer had made off with the extra money.

While getting checks or payment software legitimately requires a bit more time, it still is pretty reasonable. At checkwriter.com, for instance, orders in by 2:00 P.M. can be delivered the next day, although rush charges apply, Rogers says. “It’s not burdensome.”

The biggest challenge to maintaining the quality of your supplier data is its near immediate decay after being recorded.  Suppliers constantly undergo mergers, purges, acquisitions and employee churn that challenge the integrity of their data.  Dun & Bradstreet (D&B) reports its database of businesses experiences annual changes of 20% for addresses, 17% for business names, and 18% for phone numbers underscoring how quickly and frequently supplier data decays.  ERP systems perform some data quality measures at the time a supplier is set up, but they do little to preserve the integrity of the data over time.  ERP systems are reliant on quality data, but they do not ensure it.

Allowing your supplier data to decay over time is very costly to your enterprise. Inaccurate data delays implementation of ERP systems and other automated solutions and can prevent those solutions from achieving their optimal ROI, effectiveness or their value over time.  Failure to identify overlaps or relationships within your supplier population can lead to missed volume discounts or rebates as well as an increase of duplicate payments by up to 300%.  Poor supplier data quality is also very costly in terms of lost efficiency and time.  Bad addresses alone can lead to miss-sent shipments and checks.  Quality supplier data is also vital to stay in compliance with various external regulations and internal controls.  Failure to achieve this compliance can be both disruptive and very costly while causing great exposure and risk.

Collection and management of supplier data is more important now than ever.  New 1099 tax legislation included in the funding provisions of the Patient Protection & Affordable Care Act (March 2010) requires companies to collect valid Tax Identification Numbers (TINs) on a much larger scale than pre-legislation levels.  Today most companies are expected to perform 1099 reporting for less than 10% of their supplier population. When the new law takes effect, companies can expect reporting levels to rise above 90%.  Companies will need to implement new policies and potentially even new systems to manage supplier information more accurately in pursuit of staying in compliance.

The question arises: How are you going to ensure the ongoing quality of supplier information to achieve optimal project ROI and on-going efficiency while maintaining compliance with controls and regulations? 

Check back for part two.

At the same time, manual processes within many accounts payable functions adds time and cost to the system. For instance, 30 percent of respondents said they’ve missed early payment discounts within the past twelve months, while another 27 percent incurred late payment fees. Similarly, about one-quarter of survey participants said mistakes by their customers meant their firms had not received a payment due them.

Human errors, either in AP or procurement, are behind more than half the mistakes, such as missing early payment discounts, survey respondents said. Lack of communication between the AP and procurement departments is the reason for another one-quarter of mistakes.

Perhaps because of this, a majority of companies are steadily moving to streamline their finance processes. More than half (56 percent) of the processes surrounding spending are now automated, versus 50 percent in 2009. In addition, 46 percent of indirect spending is captured in companies’ PO systems, up from 42 percent a year ago. Finally, 44 percent of respondents predicted that electronic invoices for B2B purchases will replace paper-based invoices within the next five years.

Several attributes are common to many high-performing AP departments. For starters, they are 21 percent more likely to have established centralized processing or a shared service center for accounts payable than other firms. In addition, these firms are 37 percent more likely to have fully automated their procure-to-pay processes.

To move forward on these initiatives, nearly 60 percent of best-in-class companies conducted internal assessments of their AP and AR processes and technology. Similarly, 48 percent have integrated their electronic payment solutions with their accounting or ERP systems.

To be sure, payments at all firms continue to shift electronically, driven by the need to cut costs and operate more efficiently. Nearly 60 percent of respondents to the study indicated that they had increased their use of ACH, while more than 40 percent had boosted their use of both commercial cards and wire transfers. Conversely, 57 percent had decreased their use of checks.

Even so, checks continue to account for the bulk of business-to-business payments. They make up 70 percent of payments from major suppliers and 78 percent of payments from other vendors. While many companies have made great strides in automating their payment processes, much work remains.

Although the move underscores a tremendous period of growth and success for Lavante, I am still a little nostalgic about leaving what has become my second home over the past seven years.  It is at this location where I watched Lavante blossom into the industry leader that it is today; it is at this location where I enjoyed the distinct pleasure of building a world class team of professionals; and it is from this vantage where I earned the privilege of working with  many of the valued clients and partners that are reading this note today.  Thank you.

Through our transition, please continue to expect great things from Lavante.  We are leveraging the new expansion as an opportunity to increase all of our departments including sales, marketing and engineering.  It is likely that you will see the Lavante brand more frequently in the market, and if you haven’t already… you will soon hear about our expanding product line for Supplier Information Management (SIM) services.  

I encourage all of you to take an active part in our growth.  Please ask questions about what we are up to and if you are so inclined, please offer your thoughts about how we can build better tools or how we can better serve you.  Since 2001 we have excelled because we have regarded our clients as partners, and we have always built the tools that dealt directly with their pain points and needs.  We now find ourselves in a position to listen more intently and to do more to support our partnerships.  We welcome this opportunity.

Thanks again for all that you have done to support Lavante throughout the years, and let this message serve as an open invitation to visit us at our new location at any time — to get a first-hand look at what we are up to!  

Sincerely,

Joe Flynn, Founder and CEO, Lavante Inc.

A payer that fails to carry out backup withholding when it’s required may itself be liable for any amount that should have been withheld, according to information from the accounting firm, Deloitte.

What’s received less attention is the fact that the current backup withholding rate of 28 percent is scheduled to expire at the end of this year. According to information from the IRS, it will revert to 31 percent. That’s because the request to extend EGTRRA, or the Economic Growth and Tax Relief Reconciliation Act of 2001, does not include keeping the backup withholding rate at 28 percent. So, the rate will revert to 31 percent, or the level that was in effect before EGTRRA.

Although the change is still six months out, AP professionals will want to begin identifying the changes to their systems and procedures that they’ll need to make in order to shift to the new rate.

Jason Busch of SpendMatters.com spent some time exploring the new Lavante/Basware partnership diving a little more deeply into why such a partnership would take shape.  Astutely, Busch points out that neither firm has played at “superficial Barney deals” (read: “I love you, you love me”) which frequently dot the partnership landscape.  So why should these two groups, which may seem to have otherwise disparate backgrounds come together?

From his review of the deal announcement, Busch quickly connect dots, and highlights a marquee quote from the release, “the combination of Basware’s enterprise purchase-to-pay solutions and Lavante’s suite of Supplier Information Management (SIM) tools will enable Fortune 1000 companies to drive efficiencies throughout the purchase-to-pay process and maximize their return on investment.”  If I may add a little more self-serving color around this quote… For years, Lavante has delivered vendor file management in tandem with its flagship supplier recovery services and has recently expanded vendor file processing into ongoing on-demand SIM.  Basware customers, attempting to install enterprise-wide P2P solutions are often gated by poor quality of their resident supplier data  and there really is no quick fix for this dilemma.  Although a supplier cleanse project can prove helpful to improve data quality in the short term, that information begins to deteriorate rapidly.  Lavante benchmarking demonstrates that at least 50% of suppliers will change some relevant attribute on an annual basis and the Institute of Management Accounting estimates that up to 7% of companies annually change their name.  Long story short:  Lots of constant change.  The solution to this constant data drift may start with a project, but truly requires an ongoing process to sustain the data quality, and that is where Lavante SIM comes into play and provides that ongoing quality (as well as many other services).

Another of Busch’s accurate observations (which was not mentioned as directly in the release) is how Basware can leverage Lavante’s recovery services to decrease the barriers of entry for clients that run into budget difficulties.  Busch writes, “Lavante can serve as a means to generate the working capital to fund investments in invoice automation solutions such as Basware.”  For years Lavante has refined its platform for communicating with and driving compliance throughout a company’s vast vendor population.  In that process, Lavante is able to perform a near-effortless review supplier AR ledgers.  It is with this ongoing visibility that Lavante is able to unlock working capital from within the supply chain and return it back to the enterprise.  These dollars which average about $600,000-$900,000 per $1Billion spent by an enterprise can quickly add up to millions of freed up working capital and can be applied to fund any number of investments in the P2P space and beyond.

Read the full Jason Busch article

Download the “New 1099 Tax Laws” Webinar for free!

We are still celebrating a huge success surrounding last Friday’s webinar.  With very limited outreach efforts, we overbooked the capacity of our web cast provider and we retained all attendees for the entire event.  Anyone well rehearsed in presenting webinars will acknowledge bth of these data points as huge feats!

Sherry DePew conducted and expert walk-thru of the new 1o99 laws which will dictate the future of 1099 reporting for companies (of all sizes) for the next several years.  The new laws will increase workloads, staffing requirements and exposure to significant non-compliance fines.  Sherry outlined a very realistic plan for getting all the facts and for getting prepared.

We are scheduling many more webinar events about similar and related topics soon.  Please notify us at info@lavante.com to get on our distribution list.

We would love to hear any comments or questions whether you were able to attend of not and we are offering a free video replay of the webinar by clicking on the tile below.