Customer reference in credit transfers: Benefits and specifications

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  1. Introduction
  2. What is a customer reference?
  3. What are the benefits of entering a customer reference?
  4. What does a customer reference number consist of?
  5. How is a customer reference different from other codes, such as an order number or description?

In order to reconcile a large number of incoming payments with outstanding receivables, many businesses issue a customer reference. In this article, you will learn what a customer reference is, what benefits this type of reference number offers for businesses and how it differs from a description or order number.

What's in this article?

  • What is a customer reference?
  • What are the benefits of entering a customer reference?
  • What does a customer reference number consist of?
  • How is a customer reference different from other codes, such as an order number or description?

What is a customer reference?

A customer reference is a key element when transferring funds between businesses and between businesses and their customers, and it's often used in ecommerce. It is a special code added to the recipient's account to confirm the identity and purpose of a transfer. A customer reference may also be referred to as a "customer number", "customer reference number", "end-to-end reference" or "reference number".

Customer references enable businesses to conduct transactions securely and efficiently. By including a customer reference in their processes, businesses can ensure that their payment transactions are processed properly and quickly and prevent errors. They have more control over their finances, as well as a detailed overview of each individual transaction.

It is important for each party to enter the customer reference correctly, or else the transfer may not go through. Entering the reference incorrectly – or not at all – can lead to extra work for those processing the transaction, which is both time-consuming and costly. In order to avoid this, many financial institutions recommend their customers use the same code every time or generate automatic references. When creating a customer reference number, businesses should ensure that each number is unique and that their data is protected.

In addition, businesses should always enter the customer reference on invoices or payment requests to ensure that their customers are aware of their reference and the fact that they are advised to enter it when making transfers. However, entering a customer reference is not mandatory when making transfers. This is why businesses need to inform their customers that they need to enter it.

What are the benefits of entering a customer reference?

The customer reference number enables businesses to track, classify and allocate incoming payments more efficiently. In addition to that, it also increases transparency. Using this number allows businesses to group various individual orders under a single order and identify the individual items in an overall total quickly. This enables expenditure items on multiple accounts to be summarised and outlined more easily. All of this gives businesses more control over their business cash flow. Customers also benefit from the fast processing of transactions.

What does a customer reference number consist of?

A customer reference number is a unique code that companies use in the context of their transfer processes. This code may be of different lengths and may vary based on the type and manner of the process. Although businesses can generate customer reference numbers in different ways, there are certain general standards that need to be followed.

A reference number must have a maximum of 35 characters and is normally made up of figures which enable the recipient to clearly allocate the payment. When creating a customer reference number, businesses should ensure that each number is unique and that their data is protected. Businesses should also always ensure that the number is easily legible.

How is a customer reference different from other codes, such as an order number or description?

This customer reference number is different from other frequently used codes such as order numbers, invoice numbers and descriptions. It acts as a code to identify a given transaction and to ensure that the payment is processed correctly. Order numbers are used to identify an order placed by a customer. This number is normally included on the receipt or order form and can also be used for both online and offline orders.

Invoice numbers are similar to order numbers and are used to identify each invoice sent to a customer. When a customer transfers money to a business, it can use this number to ensure that the amount is allocated correctly. Again, this number is not linked to the customer reference – it only identifies the invoice in question.

Descriptions are optional and can be entered by the account holder to give more information on the reason for the transfer or can be used to determine which specific items the payment covers. While the customer reference allocates a payment to a business transaction using a combination of numbers, a description may consist of up to 140 characters, including letters, and can be entered in free text. In contrast to the customer reference, the description usually cannot be read by machine.

Two other numbers frequently used with transfers are the mandate reference and customer number. The mandate reference serves as a unique identification number for SEPA transfers and is issued by the payment recipient. A customer number, in contrast, is a unique identification number for a customer within a business.

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