BBVA API Market
Collection processing is one of the most important functions of the treasury department in any company, both large and small, and regardless of the sector in which they operate. This important function is used to collect the money from the company’s commercial transactions and to decide how to use this liquidity.
This is therefore the department responsible for ordering, planning and controlling the timely and orderly collection of invoices, preventing errors from occurring and demanding payment of past-due invoices. This is a very sensitive department that needs to be run smoothly, which makes it important that it be managed properly.
Collection processing seeks to control the financial resources that a company needs to undertake its investments, pay outstanding debts or meet its payment commitments (such as salaries, taxes, etc.).
Without this important function, a company could find itself having liquidity problems that could lead to a suspension of payments, especially if the most sensitive transactions and those at greatest risk of non-payment are not controlled.
Moreover, efficient collection processing will yield huge benefits for the company’s profitability. By having a better liquidity forecast over the medium and long term, the accountants can anticipate future financing needs, thus optimizing resources, reducing financial expenses and improving profitability for investors.
The launch of the Single European Payments Area (SEPA) in 2015 improved the oversight of some of the main collection operations, including the direct debit of bills, one of the most common collection and payment transactions. It relies on a direct debit or mandate order, whereby the debtor (payer) authorizes the creditor (payee) to make the necessary charges to the payer’s account in exchange for a service.
Thanks to the enactment of SEPA, any charge posted with any European financial institution in the single European payments area is processed as quickly and securely, and at the same cost, as those posted nationally. SEPA also provides a fundamental tool to reduce the time and effort required to claim overdue payments and settle payments, since it can be perfectly integrated into the business systems of most companies.
It is designed to process periodic payments, such as the payment of fees in academies, schools, gyms and, in general, in any business that periodically collects fixed payments. In this case, the customer authorizes, through the SEPA mandate, the payment for the service through their bank account. But it can also serve as a method for collecting one-time operations.
However, its use is not useful for all types of operations, since SEPA direct debit charges are not immediate, even in the fastest B2B schemes. For example, in the case of transactions requiring immediate settlement, the use of direct debit is not recommended, and the company has to resort to another type of payment method, such as bank transfers.
Digitization in companies has also been applied to collection processing. Generally, through an enterprise resource planning (ERP) program, a company can control all outstanding collections from customers. This requires that the corresponding invoices be issued and then tracked correctly to ensure timely collection.
Usually, collection processes that rely on direct debits can be automated thanks to banking communication. Companies have their customers’ mandates stored in the system, with a contract validity date through which the customer authorizes invoices to be direct debited from their checking account.
This process ends when the debt is settled, at which time the company registers and records all the payment information, especially for those that have been collected by means not covered by the ERP, and knows in advance whether all pending invoices have been collected or not.
At present, banking communication is usually done via P2P networks between the bank and the company’s ERP system. This is a process in which the company sends a file in a standard format (for example, in the case of direct debit payments, format 19 is used) to the bank, which processes this information and executes the operation. This process is done a certain number of times a day, depending on the needs of the business, and the bank responds with the transaction authorization.
However, with the opening of banking APIs, this process has been significantly streamlined, making all the information on collections (and also payments) flow quickly and smoothly, even in real time. In addition, this type of interface can be incorporated quickly in a standardized format into the ERPs of companies, which will help reduce operating costs and streamlines processes. It is even designed for small companies whose financial capacity is not large enough to justify using a large ERP system.
For example, thanks to Business Collections lets you confirm your customers’ payments in real time through your CIE agreement. You can thus speed up those processes that result in increased customer satisfaction, such as delivering a product to them or reactivating suspended services. You can also show the debit entry to facilitate instant payment.
The advantages of using APIs for processing collections are obvious:
In short, collection processing has become a fundamental process for all companies, regardless of their size. For this reason, it is important that information be available quickly, smoothly and with as few errors as possible. In these circumstances, APIs are the ideal tool to achieve this.
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An API is a very useful mechanism that connects two pieces of software equipment to exchange messages or data in a standard format such as XML or JSON. Thus, it becomes an instrument that can be used to search for revenue, open the doors to talent or innovate and automate processes.
There are companies that collect and store bank data: information on accounts, transactions, credit-card operations, loans, investments... These companies' APIs give entities access to new markets and new customers.
