When making an account-to-account transfer to a company or institution, the payer often has to enter a payment reference. This allows the recipient to easily and correctly identify who is paying and what for.
For a European transfer, the payer can enter any description they like or a specific, standardized payment reference.
Reconciliation
When a company or institution sends an invoice or tax assessment, it contains certain information that the recipient must enter when paying by account-to-account transfer. This information includes, for example, a customer and invoice number or a specific standard payment reference. This information allows the company or institution to easily and correctly identify the payment and process it in its accounts, linking it to the correct customer and the correct invoice or tax assessment. Recognizing and correctly processing the payment in the accounts is also known as ‘reconciliation’ or ‘reconciling’.
Without the requested invoice or assessment details accompanying the transfer, such as the payment reference, the payment may be incorrectly entered in the company’s or institution’s accounts. They may then mistakenly believe that the customer has not yet paid a particular invoice or assessment.
Standards for payment references
There are two types of standard payment references: a Dutch payment reference of up to 16 digits and an international ISO payment reference of up to 25 letters and digits. Both types of payment references contain special check digits that allow the bank to check for typing errors made by the payer.
At most banks, the payer must enter a payment reference in a separate field when making the transfer. The bank can then check the payment reference for typing errors. Other details, such as a customer and invoice number, must be entered by the payer as a free description when making the transfer. The bank cannot check these for typing errors.
Examples
An example of a valid Dutch payment reference is 5000 0567 8901 2345. The first digit, 5, is a check digit that the sender of an invoice or tax assessment calculates based on all the other digits in the reference. If the payer makes a typing error when entering the reference, the check digit will no longer be correct and the bank may display a warning.
An example of an international ISO payment reference is RF98 REF 1234. The first two letters are always RF, derived from the English word “ReFerence” (reference or identifier). This is followed by two check digits that are calculated based on all other digits and letters in the reference. In this example, the two check digits are 98.
