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Monday 22 November 2010

Overcoming the Barriers to adopting e-billing/invoicing

If you put the term “e-billing” into the Google search engine, almost 10 million results are returned and articles and items stretch back for over 10 years since people began talking about the topic in earnest. But adoption rates have been slow and very few companies have taken the plunge. When asked why, most companies say that there are too many barriers to overcome and they are therefore still waiting for better options. So what are these barriers and are there any ways in which to overcome them? When you analyse the most often mentioned obstacles or barriers, 5 seem to emerge as the most significant. Let’s look at each of these in turn:

1. Too many people don’t have or don’t use the Internet
While this was true 10 years ago and partially true even 5 years ago, it is largely not true today. Over 23 million people in the UK now have access to the Internet and over half of these have broad band access. Furthermore, 2 in every 3 adults in the age range 18-65 now log regularly into an Internet bank account to perform a variety of transactions. With ready access to on-line banking sites via smart phones, this number will quickly increase further.

2. Customers won’t like it
Customers are notoriously slow to accept change and will usually only do so if they have compelling reasons to do so. Almost 100% of possible customers famously rejected using ATM machines when it was introduced as a concept over 20 years ago, and yet there are now 60,000 of them in the UK (1 for every 1000 people in the population). In addition it has become the most popular and convenient way to not only get money but to perform other financial transactions. This turnaround was achieved with ATMs by making the whole experience simple or straightforward. Hence, the “trick” for e-billing adoption is to make it as easy as possible for customers to use it-this means that the approach should be user-friendly, fast (only a few clicks) convenient and safe-an issue we will look at next.

3. Accepting on-line payments is not safe or secure enough
This is a serious concern and one which is much discussed on Internet blogs and elsewhere (especially when people have bad experiences). Research suggests that 25% of people do not like using their credit cards on line as a result of safety and security concerns. However, apart from the 75% who clearly are, the credit card companies have done much to improve on-line systems in the last couple of years, with “3D-secure” technology being one of the most significant. In addition, good e-billing and payment sites do not require credit card detail storing and therefore provide an “instant pay” option. This allows customers to make a 3D-secure based credit or debit payment as many times as they like until they feel more comfortable to register (and even then, only do so at a site that provides a login/password/anti-login robot process)

4. It’s too disruptive to existing billing practices/processes
The entire billing and payment system can involve quite a lot of people and processes so its easy to feel that the effort to change can be quite time consuming at least and very disruptive in some cases. However, once again, it depends what solution you decide to bring in. Many full digital billing solutions (such as www.payswyft.com) operate as an adjunct payment channel to existing processes. The beauty of this approach is that an organisation can offer its customers a full ebilling experience without necessarily changing very much at all in the short term. Customers are merely told (on either their physical bill or on the company web site for example) that they can pay on-line and can do so easily. At a later stage, as people and processes are ready, the organisation can then more strongly incentivise the customer to use the on-line system and use the savings to fund process changes and the re-purposing of people’s time (as effort is saved on older practices).

5. The software integration is too difficult or complex
While occasionally true this is often an excuse to “leave things as they are” and in reality, once gain, really depends on what solution you decide to bring in. It is true that many software based solutions require quite a lot of work to integrate the e-billing software with the internal accounting system (which may be quite a difficult task at times). However, the best and easiest solution is to use a third party portal (again such as PaySwyft) which allows invoices to be easily uploaded to the site (in bulk at one go) and then be paid by a variety of means in just a few clicks). Such sites allow API uploads straight from accounting software packages and will allow easy reconciliation back to receivable files (saving huge amounts of time and effort).

Summary
E-Billing and payment is the way of the future but many organisations feel that adopting it may take a lot of time and effort. However, as we have seen above, by adopting a full digital solution with a sophisticated third-party portal, the whole process can be made quite simple and involve very little time and effort. As a result, any organisation, no matter how small or large, could be e-billing successfully within just a few days of deciding to offer it (and be saving lots of time, hassle and money in doing so).

Tuesday 16 November 2010

What is the real cost of paper versus electronic billing or invoicing?

This might seem to be quite a simple question at face value but when we think about it, the answer is not exactly a straightforward one. This is because we are not always aware of the real costs of performing this quite complex task in all of its steps. In addition, while direct or tangible costs are relatively easy to identify, indirect costs are less easily identifiable and some of these are often very well hidden. Let’s therefore look at what tends to fall into these three categories of costs when comparing traditional paper-based billing versus full on-line or digital billing.

Direct Costs
At face value most people would estimate that a few “direct” costs are involved in paper-based billing. These may include:
•Invoice bill/file preparation/printing
•Paper invoices/bills
•Printing (ink or cartridge replacement)
•Envelopes
•Postage/Franking
•Offering basic payment options (debit, credit, other at standard fees)

Costs will fall as bill volumes increase for most of the above but even if they do postage or franking at about £0.40 to £0.45 pence will always be the biggest fee here. And the others will typically add as much as 30 to 35 pence making for a total of £0.70 to £0.80 of direct costs. Of course, if a merchant emails invoices (with a PDF attachment), instead of physically mailing them this may fall in half perhaps.

Indirect Costs
Costs are often deemed to be “indirect” because they are either fixed and/or cannot be wholly charged to the billing costs (especially if it is only part of a person’s job). However, even proportional costs add up here. Indirect costs may include:
•Customer service manpower to handle calls/queries
•Accounting/Reconciliation manpower
•Lost invoices (and the time taken to deal with this)
•Undelivered bills (and the time taken to deal with this)
•The cost of bill storage (space rental or fixed costs)
•Bill query handling time

Once again there may be some economies of scale in the above but all of these items (except bill storage perhaps) mainly involve having staff on the payroll or at call. Even at 500 bills a month, at least quarter a person would typically be involved in issuing and reconciling invoices and another quarter in handling queries, re-issuing bills or handling “special requests” related to invoicing or payments. If the cost of this person (or two part-timers) were £12,000 a year (£8,000 plus 50% salary/overhead burden) or £6,000 each, this £1,000 a month would amount to £2 per bill.

Hidden Costs
Costs are often deemed to be “hidden” because no-one is scrutinising or controlling them (they go unmeasured or unaccounted for or are lost in general overhead or the broad costs of doing business). Hidden costs may include:
•Extra or hidden payment transaction fees (which may be fixed or higher than necessary)
•Invoice/billing run or payment processing errors
•The need for a higher than wanted or necessary float/overdraft at the bank
•Possible added customers or more business from having more payment options
•Quicker settlement/cycle time (by use of SMS or email alerts)
•Easier training of staff/opportunity to focus staff elsewhere with time saved
•Potential cash-flow acceleration
•Easier/cheaper compliance and audit work with digital billing
•Lower/No cost digital marketing opportunities
•Overall incremental "Green" benefits/credits

The benefits to an organisation of the long list above are obviously much harder to calculate but a variety of studies in recent years have suggested that these can conservatively add up to as much as 3% of revenues or as much as 15% of profit. If we assume our little company doing 500 bills a month has an average transaction or “ticket” value of £40, turnover per month is £20,000 or £240,000 per annum. If we assume that profit is 15% of this or £36,000, this all means that the cost per bill is somewhere between £0.90 to £1.20.

So in summary, if we add all of these costs together which have a total traditional or paper-based billing cost of £3.60 to £4 or 9.5% of the revenue collected each time (£40 average ticket value). Now that’s a quite a serious amount of money for this little company not to take pretty seriously! But what about your company?-what is 9.5% of your revenues? And when you have calculated it in cold hard cash, can you afford not to investigate the potential to save as much as half of this as recurrent savings every year by moving to digital billing?

Sunday 14 November 2010

What is e-billing?

Lots of people are talking about the convenience of e-billing but are they all talking about the same thing when they do?

In traditional "off-line" billing or invoicing, a paper invoice is generated either by writing it out in long-hand, typing it into a word processing or spreadsheet package or perhaps generating it via an accounting software system of some kind. The problem with this approach is that it is time-consuming and typically costs a lot more than sending out the same invoice via the web.

Sending out an invoice as an attachment to an email is often called e-billing but is really not much different to sending out a paper invoice in many ways. There are obviously a few advantages to doing this (not least is saving the paper, envelope and the stamp, as well as perhaps speeding up the process of getting the invoice to a customer). However, there are still some problems with this approach. The main ones are that we may not always be sure that our invoice has got to the right person, or to the person who has the ability to pay it. It is also usually just a "static" document that commonly gets printed out and then treated in the same way as a paper invoice. Even at the mechant end, the email may need a PDF attachment which has to be printed to be kept in a physical file and is still needed for later reconciliation (a nightmare if you are sending out a lot of invoices each month). This is therefore not really a full e-billing solution.

A full and proper e-billing approach is often called a "digital" bill or invoice. In this instance, a bill is made available in a fully interative way in website portal so that the recipent can click on the bill (after viewing it in summary or detail form)in order to pay it (and then save it electronically if he or she wishes). Apart from the benefits of potentially avoiding the need for paper and saving the stamp, and being very quick and cost effective to deliver, the added advantage here is that the bill can be readily sent on-line to multiple people (including those particular individuals with the ability to pay it). In addition there is a full audit trail and reconciliation is made easy for both the payee and the merchant who sent the bill or invoice.

Welcome to E-Billing matters

This is a new blog but one that we hope that our followers will find invaluable over time. Each week (and sometimes more often) we will post a range of best practice information about on-line billing or payments or specific tips about how consumers and organisations or all sizes and types can improve overall efficiency and effectiveness in billing invoicing practices or in getting bills/invoices paid.

For the most part our blog postings will be highlighting a wide range of ways in which the phenomenon of the Internet can be used to gain substantial benefits for anyone who wants to invest  a small amount of time and energy. While some of these benefits will involve savings in terms of time and hassle (and will therefore not always be tangible or easy to measure) in many cases the benefits will be related to the ability to save money directly-and in some cases the savings will be substantial.

We hope you enjoy our future blogs and look forward to hearing from our followers everywhere.

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