D365: SEPA direct debits feature

In today’s post, I’d like to dig into SEPA direct debits payment feature in AX.

What is all about?

SEPA stands for Single Euro Payments Area with the aim to make intra-European payments as convenient as a domestic payment. SEPA direct debit transfer is a payment method where the customer allows a vendor to debit the due amount directly from the customer’s bank account. This is done through a mandate authorization signed by the customer.

SEPA direct debit is particularly suited to support recurring transactions, subscriptions, “on-demand”, “pay-as-you-use”, or returning customer scenario’s. In this process mandate is required. A mandate is a document set-up between a creditor (the vendor, merchant) and a debtor (the customer) that gives the creditor the approval to debit the debtor’s account for a given product/service. This is some kind of proof that the Creditor is mandated to debit the Debtor’s account.

Before I dive in this feature I want to present normal lifecycle scheme.

SEPA lifecycle

  1. PAYEE creates Mandate which is identified by a Unique Mandate Reference that allows to identify the contract to which the SEPA direct debits are attributable. PAYEE sends Mandate to PAYER.
  2. PAYER signs in the Mandate. Debtor must sign this mandate in order to prove that he or she consents to the creditor debiting the debtor’s account.

(Goods are shipped and invoice is generated)

  1. PAYEE sends pre-notification to the customer before debiting his account. The creditor must pre-notify the debtor of the upcoming direct debit at least 14 calendar days before the due date.
  2. PAYEE initiates the collection of a SEPA direct debit for delivered services or goods by means of a payment order the payee sends to own bank. Let’s call this step as SEPA direct debit order.
  3. The order for a SEPA direct debit is cleared on the specified execution date through the National Clearing System.
  4. Funds from the debtor’s bank account will be debited and transferred to the creditor’s bank account.
  5. The payer’s bank debits the payer’s account for the amount of the SEPA direct debit order on the specified execution date, and the payee’s bank credits the payee’s account for the amount of the SEPA direct debit.

Now let’s jump into AX to look at this process

Set up a number sequence for direct debit mandates

This setting is important to generate unique number of each direct debit mandate. This number sequence will be used on the customer record while creating new mandate

Click Accounts receivable > Setup > Accounts receivable parameters.

Click Number sequences, and then in the Number sequences area, select a number sequence code for the Direct debit mandate ID reference.

Direct debit mandate ID NS

Set up Accounts receivable parameters for direct debit mandates

Click Accounts receivable > Setup > Accounts receivable parameters.

Click Direct debit, and then in the Direct debit area, make the following selections.

Set the following:

Days required for the first pre-notification 14

Days required for recurring pre-notifications = 14

Days required for the first core scheme bank submission = 5

Days required for recurring core scheme bank submissions = 2

Month between usage and expiration = 36

The days are taken from SEPA rule book. Follow the link to review details – https://www.europeanpaymentscouncil.eu/sites/default/files/KB/files/item%205%20EPC016-06%20Core%20SDD%20RB%20v8.1%20Approved.pdf

Accounts receivable parameters for direct debit mandates

Set up a method of payment for direct debit mandates

Click Accounts receivable > Setup > Payment > Methods of payment.

Enter a code for the method of payment, such as SEPA.

Enter a name for the method of payment, such as SEPA Direct Debit.

In the Payment type field, select Electronic payment.

Select the Require mandate check box to create payments using direct debit mandates

Note: The Require mandate check box is available only if you select Electronic payment in the Payment type field

SEPA Direct Debit method of payment

Expand File formats FastTab.

Generic electronic reporting to Yes.

Select Export format configuration.

Export format configuration blank

If no format available, go to Organization administration > Electronic reporting.

Electronic reporting

Click Repositories link.

Repositories link

Click Open button.

Open button

Select the following node: Payment model > ISO20022 Direct debit.

On the right-hand side, select ISO20022 Direct debit.

In the Versions section, click Import:

Import

Click Yes.

Click Yes

Click Yes.

Click Yes 2

Go back to the Method of payment and select Export format configuration SEPA Direct debit.

Export format configuration SEPA Direct debit

Edit customer information

Click Accounts receivable > Customers > All customers.

Double-click on a customer name.

On the Action Pane, click Edit.

On the Sales Demographics FastTab set currency to EUR.

Currency EUR

On the Payment defaults FastTab set method of payment SEPA.

Default method of payment

On the Addresses FastTab set the address.

This address will be used during Mandate creation.

Address

Create bank account for the customer

Click Accounts receivable > Customers > All customers.

Double-click on a customer name.

On the Action Pane, click Bank accounts.

Click New

Make sure that SWIFT, Currency and IBAN are correctly filled for that bank account

Add direct debit mandate information to a customer account

Click Accounts receivable > Customers > All customers.

Double-click on a customer name.

On the Action Pane, click Edit.

On the Direct debit mandates FastTab, click Add.

Enter information about the mandate.

Make the following selections.

Bank account: Select the customer’s bank account. The IBAN and SWIFT code fields must be filled in for the bank account if it is used for direct debits.

Creditor bank account: Select the company’s bank account. The IBAN and Direct debit ID fields must be filled in for the bank account if it is used for direct debits.

Signature date: at this point keep it blank

Mandate scheme: Core

Payment frequency: Recurring

Add direct debit mandate

Pay attention to the Mandate status. Now it’s Incomplete due to blank signature.

Incomplete

Generate a mandate for the customer to sign

On the Direct debit mandates FastTab, select a mandate, and then click Print > Mandate report.

Mandate report link

Send this mandate to customer.

Mandate report

Return back by clicking on Edit button and change Signature date. Enter the date when the mandate was signed.

Pay attention to the Status, not it’s New.

New status

Attach a scanned mandate to the customer account

Once customer sends it back, attach the scanned copy to the mandate

On the Direct debit mandates FastTab, select a mandate, and then click Attachments.

Enter a free text invoice for a customer

Click Accounts receivable > Invoices > All free text invoices.

On the Action Pane, click New.

Select a customer who has a direct debit mandate

Method of payment will be automatically filled in from customer.

In the Direct debit mandate ID field, select a mandate reference.

Add Free text invoice lines.

Free text invoice

On the Action Pane, click Post.

In the Post free text invoice form click OK.

Click View / Original.

The invoice is printed. The SEPA direct debit notification section is printed at the bottom of the invoice.

SEPA direct debit notification section

Print a direct debit mandate notification report

Click Accounts receivable > Customers > All customers.

Double-click a customer.

On the Direct debit mandates FastTab, select a mandate, and then click Print > Notification report.

Notification report link

Send this report to a customer to let them know which invoices are scheduled to be paid through the mandate.

Notification report

Create payment for customer who has direct debit mandate

Payment journal form will be used to create a payment proposal for customers who have direct debit mandates.

To create a payment proposal, follow these steps:

Click Accounts receivable > Journals > Payments > Payment journal.

Select a journal name, and then click Lines.

Select a journal line, and then click Payment proposal > Create payment proposal.

In the Customer payment proposal form, click Records to include.

In the Customer payment proposal query form, in the Criteria field, select the criteria for the customer transactions.

In the Customer payment proposal form, enter other information for the payment proposal as needed. In our case we will need to mimic the real scenario, so we will put Payment date = Due date of invoice (2/16/2018).

Customer payment proposal

Click OK.

Customer payment proposal 2

Click Create payments button. At this point transferring payment proposal to the journal will be done.

Transferring payment proposal to the journal

Click Functions > Generate payments.

In the Generate payments form, select SEPA Method of payment.

Note: Once you select the Method of payment, File name field will become visible.

Specify File name.

In the Bank account field, select the bank account for SEPA direct debit.

Generate payments

Click OK.

In the Electronic report parameters form, specify details for the reports.

Electronic report parameters

You are asked what to do with the package (payment file and reports).

Save options

Select Save -> Save as.

Select the path and click Save.

Save as

Payments are generated, and the payment status in the Journal voucher form changes to Sent.

Sent status

Verify the folder. The following files are created.

Saved folder

The following xml file has been generated.

<?xml version=”1.0″ encoding=”utf-8″?>

<Document xmlns=”urn:iso:std:iso:20022:tech:xsd:pain.008.001.02″ xmlns:xsi=”http://www.w3.org/2001/XMLSchema-instance&#8221; xsi:schemaLocation=”urn:iso:std:iso:20022:tech:xsd:pain.008.001.02 pain.008.001.02.xsd”>

<CstmrDrctDbtInitn>

<GrpHdr>

<MsgId>00584</MsgId>

<CreDtTm>2018-01-17T12:21:26</CreDtTm>

<NbOfTxs>1</NbOfTxs>

<CtrlSum>10000</CtrlSum>

<InitgPty>

<Nm>Contoso Entertainment System USA</Nm>

<PstlAdr>

<Ctry>US</Ctry>

<AdrLine>123 Coffee Street Suite 300 Redmond, WA 98052  USA</AdrLine>

</PstlAdr>

</InitgPty>

</GrpHdr>

<PmtInf>

<PmtInfId>0058420180216FRST</PmtInfId>

<PmtMtd>DD</PmtMtd>

<BtchBookg>false</BtchBookg>

<CtrlSum>10000</CtrlSum>

<PmtTpInf>

<SvcLvl>

<Cd>SEPA</Cd>

</SvcLvl>

<LclInstrm>

<Cd>CORE</Cd>

</LclInstrm>

<SeqTp>FRST</SeqTp>

</PmtTpInf>

<ReqdColltnDt>2018-02-16</ReqdColltnDt>

<Cdtr>

<Nm>Contoso Entertainment System USA</Nm>

<PstlAdr>

<Ctry>US</Ctry>

<AdrLine>123 Coffee Street Suite 300 Redmond, WA 98052  USA</AdrLine>

</PstlAdr>

</Cdtr>

<CdtrAcct>

<Id>

<IBAN> </IBAN>

</Id>

</CdtrAcct>

<ChrgBr>SLEV</ChrgBr>

<CdtrSchmeId>

<Id>

<PrvtId>

<Othr>

<Id>USMFDDID</Id>

<SchmeNm>

<Prtry>SEPA</Prtry>

</SchmeNm>

</Othr>

</PrvtId>

</Id>

</CdtrSchmeId>

<DrctDbtTxInf>

<PmtId>

<EndToEndId>ARPM000772-68719570994</EndToEndId>

</PmtId>

<InstdAmt Ccy=”EUR”>10000</InstdAmt>

<DrctDbtTx>

<MndtRltdInf>

<MndtId>USMF-DB000000001</MndtId>

<DtOfSgntr>2018-01-17</DtOfSgntr>

</MndtRltdInf>

</DrctDbtTx>

<DbtrAgt>

<FinInstnId>

<BIC>1234</BIC>

</FinInstnId>

</DbtrAgt>

<Dbtr>

<Nm>SEPA direct debit customer</Nm>

<PstlAdr>

<Ctry>DE</Ctry>

<AdrLine>Strafe 1-34 10115 Berlin deu</AdrLine>

</PstlAdr>

</Dbtr>

<DbtrAcct>

<Id>

<IBAN> </IBAN>

</Id>

</DbtrAcct>

<RmtInf>

<Ustrd>FTI-00000006</Ustrd>

</RmtInf>

</DrctDbtTxInf>

</PmtInf>

</CstmrDrctDbtInitn>

</Document>

The following Attending note report has been generated.

Attending note report

The following Control report has been generated.

Control report

The following Covering letter report has been generated.

Covering letter report

Click Post > Post. Payments are posted.

Payments are posted

To verify mandate information for customer transactions and print the mandate information, follow these steps:

Click Accounts receivable > Customers > All customers.

Select customer account.

On the Direct debit mandates FastTab, verify the mandate information.

Direct debit mandates FastTab

Click Transactions to review all transactions for selected mandate.

Mandate transactions

To view the remaining invoices for the selected mandate, click Print > Notification report.

The report is blank since all invoices have been paid.

Notification report blank

That’s it!

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3 thoughts on “D365: SEPA direct debits feature

  1. Hi Galyna,

    I like your article. Have you seen a possibility to generate the notifications without “jumping” into every customer account as this is quite a lot of work if one is direct debiting about 100 customers every month at one point of time? Wouldn’t it make sense to have a kind of report where one can enter the date of the DD file generation and then all notifications are generated as PDF, mail or print? Or during generating the payment file for direct debit?

    Best regards,
    Thomas

    Like

  2. Very well written and structured article, even as a pure tech I am able to understand kudos to you…

    Like

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