Payment references: how to improve payment matching

Reference payments are also known as structured payments, KID payments in Norway and OCR payments in Denmark. Similar payment types exist in many countries under different names.

What they have in common is that the payment contains a reference to the invoice or document being paid. This can be an invoice number, a specific payment identification or another structured reference.

What is a payment reference?

A payment reference is information included with a payment that helps identify what the payment relates to.

The reference may point to a specific invoice, document or other open entry. Because the reference is included in the payment information, it can make it easier for the receiver to identify and register the payment correctly.

Why are payment references important?

In many cases, you use a reference payment because the invoice specifies that you should.

In some countries, you may not be able to pay an invoice without using the required payment type and payment identification. If the required information is missing, the payment may be rejected by the bank.

Even where the use of reference payments is optional, it can still be beneficial to use them. A clear reference makes it easier for the receiver to identify the payment and can reduce manual work and the risk of errors.

For this reason, we recommend using reference payments whenever they are specified on the invoice and supported by your banking setup.

How do payment references improve reconciliation?

Payment references can make the reconciliation process more efficient because they provide information that can be used to identify which invoice or open entry a bank transaction relates to.

When the reference is complete and structured, it becomes easier to match the incoming payment with the correct entry in the ERP system.

This can reduce the amount of manual investigation required and help finance teams process incoming payments more efficiently.

AMC Banking can use reference information as part of the matching process and supports automatic matching of both structured and unstructured payment information.

Structured vs. unstructured payment references

Reference payments are structured payments because the payment contains a defined reference to the invoice or document.

Examples include KID payments in Norway and OCR payments in Denmark.

Unstructured payments contain less standardized payment information. In these cases, the information needed to identify the correct invoice or open entry may be found in free text or other transaction data.

This makes the matching process more complex and can require more advanced matching logic.

AMC Banking is designed to support automatic matching of both structured and unstructured incoming payments.

Can reference payments increase transaction costs?

In some situations, reference payments may result in additional transaction costs.

This can happen when several invoices to the same vendor cannot be collected into one transfer and instead have to be paid individually.

Whether this applies depends on the local clearing system, the bank and the customer’s bank agreement.

The specific fees are therefore bank- and setup-dependent and should be verified with the relevant bank.

Reference payments for incoming customer payments

Reference payments can also be relevant when your own company issues invoices.

By including structured payment information on your invoices, you can make it easier for customers to provide the correct reference when paying.

This can help your finance team identify incoming payments with less manual work and lower the risk of errors.

Many ERP systems support reference payments for both outgoing and incoming payment processes. AMC Banking can be used to support these workflows and automate more of the payment and reconciliation process.

How payment references work in Microsoft Dynamics 365

In Microsoft Dynamics 365, payment references can be used as part of both outgoing payment processing and incoming payment reconciliation.

With AMC Banking, bank information can be processed directly in the ERP, and reference data can be used as part of the matching logic to identify the correct open entries.

This helps finance teams automate more of the reconciliation process while keeping transactions that require manual review available for further handling.

AMC Banking supports banking and cash management processes in both Microsoft Dynamics 365 Business Central and Dynamics 365 Finance. Untitled document

Frequently asked questions about payment references

What is a payment reference?
A payment reference is information included with a payment that helps identify which invoice, document or open entry the payment relates to.

Are reference payments the same as structured payments?
Yes. Reference payments are structured payments that include a defined reference. The terminology and formats differ between countries and payment systems.

What are examples of reference payments?
Examples include KID payments in Norway and OCR payments in Denmark.

Why should reference payments be used?
They can make it easier for the receiver to identify the payment and can reduce manual processing and errors during reconciliation.

Can AMC Banking match payments without a structured reference?
AMC Banking supports matching of both structured and unstructured payment information using its matching logic.

Can payment references be used in Dynamics 365?
Yes. Payment reference information can be used as part of payment and reconciliation workflows in Microsoft Dynamics 365. AMC Banking supports these processes in both Business Central and Dynamics 365 Finance. Untitled document

Advantages

• Makes it easier for the receiver to identify and register payments.
• Can reduce manual reconciliation work.
• Can reduce the risk of errors.
• Supports more automated payment and reconciliation processes.

Things to consider

Reference payments do not necessarily reduce transaction fees.

In some banking setups, separate reference payments may have to be sent as individual transactions, which can result in additional bank fees. The exact setup and cost depend on the relevant bank, country and clearing system.

The key takeaway

If a vendor specifies a reference payment on an invoice, it generally makes sense to use it.

Structured payment references make it easier to identify payments and can support more efficient reconciliation for both the sender and the receiver.

With AMC Banking, reference information can be used as part of a broader automated payment and reconciliation process in Microsoft Dynamics 365.