Reasons Why You Should Periodically Review GIRO Arrangements
The introduction of GIRO marked the declining dominance of cheques for business transactions in Singapore. The newfound convenience – of not having to periodically take a trip to your client’s office to collect cheques, and then to the bank for its deposition – was something that was appreciated by businesses of all scales.
This appreciation fuelled the popularity of the ‘pro-GIRO’ movement, leading to many institutions providing resources that outlined the process of setting up GIRO arrangements. Yet, something that was seldom touched upon was the management of existing arrangements. While GIRO’s primary purpose is to automate recurring payments, it does not constitute a free pass for omitting human intervention and oversight.
This piece discusses one aspect of the management of GIRO arrangements: periodic review.
Why is it important?
- To ensure the details are up-to-date.
Every business has dynamic operations, which means that processes change as business conditions change. For example, consider a situation where an administrative change has occurred in your or your client’s company, and the company wants to open a new business account with a new account holder. In such a case, business bank account details would need to be updated in the GIRO dashboard. Likewise, if payment terms and tenure have been recently changed, it would be important to add the updated GIRO instructions.
Discrepancies in such details can slow the execution of GIRO transactions and even damage vendor relationships. Sometimes, a business may even be liable to pay for failed transaction fees. In rare cases, prolonged misunderstandings with payment-related issues may necessitate legal action. While the immediate importance of missing out on review may not be apparent, the long-term repercussions are certainly acknowledgeable.
- To ensure only active services are being paid for
Normally, the finance team of every company ensures the termination of any GIRO arrangements of a concluded partnership. But, for the companies with high volumes of arrangements, it’s more probable for the team to leave some out mistakenly. Keeping GIRO arrangements active for services that have been concluded is a reckless way to lose money. Furthermore, this mistake could even lead to damaged relationships with the former service provider. The reconciliation and payment recollection process can be tedious for both you and your service provider. Any minor documentation error during the recollection may spark a fire that could burn bridges.
- To detect unauthorized transactions:
Some companies share business account details with financial teams and third-party service providers for streamlined financial documentation. If GIRO details are shared along, they may reach unauthorized entities and be misused. Unauthorized payments can be made to those in the guise of legitimate companies. For instance, an unauthorized person may create an arrangement from your company to another faux but similar-sounding company that you previously transacted from. Even if the notification for such payments is received, you or your team may likely miss noticing something unusual if you are unsure about the present status of the relationship. Thus, manual review is the only surefire way to identify such occurrences.
Some helpful tips for optimizing the review process:
- Encourage all teams to keep a centralized record of all companies with which your business maintains a transactional relationship. The record should always specify the status of the relationship.
- Designate a person to review the GIRO arrangements so they don’t have to refer multiple people to gather the context of payments during each review. This will conclude the review sooner.
- If payments are being made to or received from companies that you no longer work with, always ensure to inform them about the need to terminate the GIRO arrangement. This will prevent any misunderstanding or impression that you’re wilfully ignoring the termination to obtain monetary gains.
- Send periodic emails to companies (every two to three months) to confirm if the account details that you have are up-to-date.
- Schedule the review dates in advance so that the assigned person can align their other commitments accordingly. Reviews must not be overlooked or done leniently amidst other priorities.
The Bottom Line:
Reviewing GIRO arrangements is a precautionary step that can help your business avoid the bullets of spoiled vendor relationships, legal complications, and monetary losses. Reviews allow oversight of all major transactional operations within your company, which can present various opportunities for streamlining operations and improving cash flow.