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KID number in Norway explained

What is the KID number?​

The KID number (kundeidentifikasjon) in Norway is an abbreviation for "Customer identification". It is used to associate payments with the right customer and the right invoice. In short, the KID number is a Payment reference number.

If a merchant wants to reconcile payments made via card they can get the information directly using their billing tools as all the payments are associated automatically with the invoices and their customers using the Transaction IDs.

If a merchant wants to reconcile payments made via bank transfer or check they are dependent on the bank statement as they will not get this information from their billing tool. This is because in billing tools, unlike card payments, offline payments are not automatically associated with the invoices. Instead, the bank statement has information about the payments and associated customers. However it has no information about the invoice towards which the payment was made. Linking these payments with invoices results in a lot of manual effort for the merchant. This process is time consuming and can be error prone. In Norway, the KID number helps solve this problem.

The purpose of KID number is to simplify bank reconciliations when offline payment methods are used. Additionally it also ensures that customers are making payments towards the right invoice.

Other countries have their own version of KID. For example, in Sweden it is called the OCR number. In Finland it is called the Finnish reference number. In Denmark it is called the FIK / GIK number.

Understanding further with an example​

  1. Assume a customer in Norway has 2 unpaid invoices worth kr100 and kr200 ( You can even have a simpler case with just one invoice but for now let's use this example).
  2. The customer chooses to clear these unpaid invoices via Bank Transfer.
  3. He makes multiple payments — kr50, kr30, kr70, kr50, kr100, respectively to pay off these invoices.
  4. During reconciliation, the merchant struggles to associate these payments with the right invoices because he does not know which payment relates to which invoice.

This could have been solved if there was a way to link the payments made by the customer to the right invoice. KID number does exactly this. While making payments, the customer enters the KID number and the payment is accepted only if a KID number is in the right format. ( the format of the KID number is agreed upon between the bank and the merchant ).

Additional Points to Note​

Bank Transfers​

In Norway, bank Transfers can be of 2 types

  1. Customer does a bank transfer in a manual way :

In this case the customer decides to transfer the amount whenever they want to. When they decide to perform the bank transfer, the payment can only go through only if the KID number is entered correctly by the customer. This is because of the agreement between the merchant and their bank that they will only accept payments with KID numbers in the right format. So each time the customer decides to manually perform a bank transfer they have to enter the KID number correctly.

  1. Customer sets up a Direct debit ( Bank mandate or in Norway it is called an AvtaleGiro ):

In this case the amount is automatically deducted from the customer’s bank account. Here the customer does not have to enter the KID number again and the bank automatically transfers the amount. Open question: How is the KID number recorded against the invoice then and how does the merchant reconcile payments?

Einvoicing​

In Norway, Einvoicing can be of 2 types

  1. E-invoicing with manual bank transfer: All E-invoices can be seen in the customer's bank account. Customer chooses to make a bank transfer manually by entering the KID number each time. In the bank statement, both the KID number and the invoice number will be available. This can help with reconciliations.

  2. E-invoicing with Direct Debit (bank mandate or AvtaleGiro): In this case the amount is automatically deducted from the customer’s bank account. Here the customer does not have to enter the KID number again and the bank automatically transfers the amount. Since the payments are automatically associated with the invoices, reconciliation is simplified even without the KID number.

Format of the KID number​

The format to be followed is Leading 0’s (if any) + Next Number in sequence + Check digit

Number of digits — 3 to 25 digits including the check digit. The last digit in KID is the check digit. The KID number must contain only digits ( use numbers from 0-9) and should not be alphanumeric. Merchant enters into an agreement with the bank to decide the number of digits in the reference number.

Check Digit calculation — Based on recursive MOD 10 or MOD 11 algorithm ( Can be agreed upon between merchant and the bank ).

Rules to build the KID number — KID numbers can contain customer ID and/or invoice number to identify customer and invoice but this is not mandatory.

Check digit calculation algorithm - Two options — Mod 10 algorithm or Mod 11 algorithm. Use the Mod 10 calculator to validate the KID number that you generate.

Next number in sequence - A random input number that will be used as the starting number to generate the reference number. ( This is obvious because how would you generate KID if you don't have something to begin with. This can be the invoice number too if you don't want to use a new number. Just make sure that you are only using digits and the invoice number is not alphanumeric.)

Leading 0’s - If the final number of digits in the Variable part is less than the ‘Number of digits allowed in the reference number’ then we will add 0’s at the front to match.

note
  • It is often recommended that the KID has to contain the customer number or ID and the invoice number. It is after all a customer identification number. But this is not mandatory. It can have any random number as long as it follows the agreement with the bank regarding the number of digits and the check digit algorithm.

The reason for this recommendation is that it makes reconciliation easier this way. Because you can easily look at the bank statement to know which customer and invoice the payment should be mapped to. However, modern day billing and accounting tools make it easy for you to map the payment with the invoice even without the customer ID or the invoice number.

The KID number is part of the invoice information and is also available when you export the invoices data in bulk to do the reconciliation. KID is also present on every payment recorded in the bank statement. So it acts as a common identifier to help you map the payment with the invoice and thereby making reconciliation easier.

Let’s take some examples to see how the final generated number will look like​

  1. Total Number of digits in KID - 10
  2. Next number in KID sequence - 567
  3. Check digit algorithm - Mod 10

Final KID number generated = 0000005678