The terms “push” and “pull” are now commonly mentioned when on-line billing is being described, but what do these terms actually mean in this context and what is the advantages of one over the other?
A “push” based on-line billing process essentially means that a consumer is prompted or alerted directly with a full invoice, statement or other document describing what has been purchased and what needs to be paid. This is therefore what is commonly called a “rich” document. For the most part, push-based on-line billing systems are carried out as e-mail notifications with attachment files (such as a PDF for example).
A “pull” based on-line billing process will still alert a consumer that an invoice is ready to be paid but instead of including the rich document, invites the consumer to go to a nominated web site where they can find the full bill to be viewed and subsequently be paid in digital form. Both e-mail and text messaging can be used to simply alert the customer, but merchants may elect to use off-line notifications (letters, paper-based invoices etc) as well.
Both push and pull models on online billing offer merchants the opportunity to reduce or eliminate paper invoices over time but each has advantages and disadvantages.
The advantages and disadvantages or Push-based on-line billing
Push based on-lined billing has the advantage of using a very common and familiar system that most businesses and consumers now use with relative ease -their email. Recipient addresses are unique and go straight into an inbox to be read either immediately or when the person opens their email system. In addition, emails are now readily received on mobile phones and other portable devices, allowing for very fast delivery, flexible viewing and (in some cases) access to online payment options.
Despite the above, there are a number of drawbacks with this push-based delivery model. They include:
* An email address may be incorrect or not reach the right recipient directly
* Many individuals and even organisations may have inbox restrictions the size of incoming emails. This will limit the opportunities for presenting invoices (especially when the attachment is large in size).
* Staff turnover in businesses and changes to email addresses by consumers means that it is often difficult to ensure the complete integrity of email addresses.
* Recipients can claim that they never received an email with an attached e-bill
* It is not always easy to differentiate copy invoices from original invoices with push on-line billing.
* An attachment (such as a PDF) is still only a piece of paper. A consumer may just print it and pay it offline and/or a merchant cannot easily reconcile the data (needing to key in the data again).
The advantages and disadvantages or Pull-based on-line billing
In Pull-based on-line billing, an email is more equivalent to a paper-based notification in the physical mail and simply serves to alert the customer that an invoice is available for viewing and processing at the nominated billing website (the biller’s own or a third-party aggregator’s one). As well as presenting the invoice a fully digital and therefore clickable format, web 2.0 internet technology also makes it possible to distinguish between the original and copy invoice. In addition, this fully digital format makes for very simple upload or transfer to an accounting system, thus eliminating any requirement to key in data manually and greatly aiding the reconciliation process. In addition, full digitisation allows the recipients to view their bill and render payments all on-line, at the same web site (which they may choose to do as soon as it is received).
Just as with Push based on-line billing, there are nonetheless a number of drawbacks with this pull-based delivery model. They include:
* Recipients may forget their logins and passwords to the billing web site to which they are being directed
* Recipients may not trust the web site to which they are being sent, or least feel nervous about the security offered (especially where payments are concerned)
* Consumers may be confused with what is likely to be a simplified bill or one which approximates to the one they receive in the mail-it is often similar but not the same.
* The billing web site may not be very user-friendly (leading to consumer abandonment)
So, in summary, we can say that both push and pull on-line billing have many advantages worth considering but also have a range of disadvantages that need to be considered one-by-one according to each merchant’s needs. In overall terms perhaps there are less onerous disadvantages on the “pull” side, and it is this approach consequently has the present advantage. However, as usual in the online world, choice and convenience are always key considerations, and it may well be that offering both a push and a pull-based solution offers the best outcome of all (and most quickly attains the paperless system than many merchants may crave).
Friday 30 November 2012
Sunday 25 November 2012
What is the real cost of paper-based versus electronic billing
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 3-4% 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?
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 3-4% 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?
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