Going Global: The New ISO Creditor Reference
Because of the significant differences existing among national creditor reference standards, ISO has developed a new global standard featuring the best functionalities in use today. The ISO Structured Creditor Reference to Remittance Information (ISO Creditor Reference standard) deploys three distinct features:
The number of creditor references (RF) is unlimited – there are 36^21 different unique RF per invoicing system. But with six reference numbers you can identify 217 million invoices uniquely – the shorter is better. We recommend using numbers with nine numbers, where the creditor can identify the 999.999.999 invoice reference.
The use of RFs is common in many countries at some level. The RFs allow for automatic reconciliation of receivables against outstanding invoices. Without such standards, reconciliation would be done in a much less efficient way, for example manually, based on information such as client name, address, amount paid and invoice number.
Banks operating in countries where no RF standard is in place today might consider deploying the new ISO standard.
Creditors and banks involved in the processing of a bill payment are able to verify that the RF indicated by the debtor (payer) is correct with the payment instruction, based on a unique check digit included in the RF. On the payer side, with either an accounts receivable (A/R) system or through online banking, this verification will be done at the same time that the debtor enters the payment details.
RFs can be imported into the A/R system, where reconciliation will be done automatically, as shown in Figure 2.
Last, but not least, RF standards are the basis for close cooperation between businesses and enterprise resource planning (ERP) vendors, integrators and other service providers with regard to the development of efficient IT applications in the area of payment processing.
Close co-operation of all concerned parties in the implementation process will contribute to making the ISO Creditor Reference available to billers and payers seeking to explore the global market place.
Initial feedback from corporate clients indicates that the new ISO Creditor Reference will be adopted in a first step towards cross-border invoicing, as there are no overlapping procedures with existing domestic references in this area.
The availability of a global ISO Creditor Reference standard does not immediately replace existing national or local creditor references. The adoption of the ISO Creditor Reference will be determined by market demand, e.g. whether originators of large volumes of invoices (billers) and their customers (payers) decide to use the global ISO standard. A successful rollout will also depend on the engagement of IT providers, such as ERP vendors, for example.
Banks currently offering creditor reference should therefore prepare for a period of parallel use of existing national RF standards and the new global ISO standard.
To further facilitate consistent implementation of this new standard, ISO considers publishing a Message Implementation Guide (MIG). Last but not least, parties engaged in the implementation of the global Creditor Reference are encouraged to share any lessons learned, as well as country implementation guidelines with ISO.
Implementing the RF will reduce costs and mistakes, increase STP and develop cash management techniques. All that is now needed to reconcile a payment is the RF.