Embracing E-Invoicing -The Barriers vs. Benefits

Two recent surveys (one in the US and one in Europe) have confirmed that 20% of survey  population respondents (on average) were already using a form of e-invoicing, with a further 50% actively evaluating adopting it in the near future.

These two surveys ultimately conclude that the benefits of embracing e-invoicing outweigh the barriers, for most organizations, but suggest that particular barriers will inhibit the time taken to adopt the technology or the time taken for it to become fully utilized. Let’s therefore look at these barriers and benefits in more detail:

The Barriers

The greatest perceived barriers to adopting e-invoicing is current work processes or existing process design around issuing an invoice and getting paid (and the inability to change these processes quickly or effectively). Close behind is the lack of budget to develop or purchase new e-invoicing software, or pay any incremental, up-front costs, even if this led to significant medium to long-term savings. A lack of executive sponsorship is also cited as a commonplace barrier, with the CEO or CFO most commonly expected to be a major driver of adoption in most cases.

Other commonly cited barriers are having insufficient resources to bring in a new approach (mainly people) and the associated lack of time and resources to integrate e-invoicing with current systems or software (especially on the accounting side of things). In addition, lack of awareness about available forward options and possible supplier resistance were also cited as being significant factors.

The Benefits

The greatest perceived benefits to adopting e-invoicing is its capacity to better control the whole billing process much more effectively (at every level and from bill or invoice issue to ultimate payment). This includes the capacity to ensure that invoices were less frequently lost, missing or duplicated. E-invoicing is also expected to reduce billing and payment processing costs significantly and also to decrease payment cycle times. The capacity to also dramatically reduce errors and exceptions is also seen as a significant benefit.

Another major cited benefit of e-invoicing is the capacity for e-invoicing to increase on-time payments (and even accelerate cash-flow) and to increase choice when it comes to invoice payment options and potentially when an invoice can be paid.

What does this mean to those organizations thinking about e-invoicing?

Any organization interested in saving expenses and accelerating cash-flow would be wise to research the e-invoicing options available to them (of which there are several, including cloud-based and “pay-as-you-go” systems (which avoid capital outlays and long integration effort) such as Payswyft, which immediately solve other barriers such as lack of budget and resources and the need for integration time and effort. In addition, the CEO or CFO of an enterprise should ideally act as a project champion, helping his or her organization to evaluate specific options and how particular barriers need to be overcome. In taking these two steps alone, most organizations would smooth the path to embracing e-invoicing and be able to realize the substantial benefits much more quickly (in terms of lowering their own costs and giving their customers a much better payment experience).

Optimizing the Customer Experience when paying online

Any business, no matter what size or type, needs to pay careful attention to the customer experience when they are asking individuals to visit their web site and pay online (whatever products or services they may be offering).  The focus should therefore be on giving the best possible customer experience and converting first-time visitors in particular to become happy and repeat customers. There are several ways in which businesses can improve things and in this brief article we will be looking at six of the most critical ones.

1. Every site needs to be easy to navigate. Fundamentally, any site structure should be what customer needs, not how the organization wants it to look like for internal purposes. Simple, clear and clean page design (with as little clutter as possible) focused on moving customers toward completion of their goal should be the focus.

2. Make it easy for the customer to pay. Many web sites offering products and/or services seem to be almost embarrassed to mention payment and both hide prices in obscure pages within the site and fail to give site browsers and easy way to check out. And there is no excuse for this approach today. If this is not available as a direct part of the web site design, a redirect or hosted page at which customers can view a bill digitally or make a payment in many ways is available from multiple sources.

3. Communicate product or service offers clearly. Companies need to use clear, concise wording to describe what they are offering. Once again, clear prices are critical, including any extra costs that may be applicable. If this is not the case site browsers are much more likely to abandon the site’s shopping cart (a massive problem for many organizations when they have already done so much work to get a customer so close to buying!).

4. Implement methods to improve your site conversion rate. Conversion rate is the measure how many browsers become buyers.  Conversion rates average 2.5%-3% but rates that reach 8% are not uncommon and some sites report conversion rates of even 20%. The very informative article "How To Sell More on the Web: 30 Tips To Increase Conversion Rates For An Ecommerce Site" will give you several ideas to improve your conversion rate.

5. Manage customers when they are about to abandon their shopping carts. By the time an organization has got a customer into its site shopping cart, they have done the hard work and need to close out with losing them at this last hurdle. Assuming the payment checkout experience has been designed to be a smooth and painless one, one extra step to be taken is to offer direct incentives if a customer still wants to abandon his or her purchase-this may be a further price decrease or more benefits or features (or even additional product or service).

6. Provide incentives to register (and come back). Even the most established web sites are struggling with increasing their goal of building a large pool of repeat customers. On average, it is estimated that 95-97% percent of those who visit sites on average never return, even when they have paid.  To prevent this, provide as much incentive as possible for customers to register so that future emails and alerts can be sent to visit the site again.

Summary

Ultimately, any businesses aiming to succeed online must rise above their resource constraints and strive to provide quality e-service. The above 6 actions sound easy to implement (and they are) but very few organizations bother to spend the time to do so. Any organization that takes the time and makes the above changes to their web site will therefore reap considerable commercial benefits.

Are emailed invoices just as good as digital ones?

Most people now believe that electronic invoicing offers significant advantages over paper-based processes (saving direct costs like printing an invoice, stamping an envelope and sending it in the mail etc and saving indirect costs such as lost invoices, late and missing cheques in the mail and often much more difficult reconciliation). However, there is not always agreement on what the term “electronic invoicing” actually means and in this brief article we will look at two very different kinds of e-invoicing-emailed invoices and digital invoices. These are often perceived to be similar and/or equivalent methods but, as we will see, they are actually quite different.

Emailed invoices

Sending an invoice via email is usually done these days by attaching the invoice as an Adobe PDF document. This allows the invoice to be sent cheaply and quickly to the recipient who can use a free product (Adobe Acrobat Reader) to open and view it. The simple idea here is that once the customer has reviewed the document (and even saved it to his or her hard drive) he or she can then pay it. In theory (especially in Business to Consumer or B2C markets) the invoice is not only sent out quickly (and at much lower costs than traditional invoicing methods) but means that the customer can send back a cheque or phone in a credit card payment within hours or just a few days (and well ahead of the latest date he or should could technically pay) thereby helping to accelerate merchant cash-flow. Unfortunately, although this works in some situations, the process is rarely this smooth and a number of problems can occur.

Firstly, the merchant needs to have a customer’s email address to be able to send a PDF. Secondly, the PDF is still a flat document which most customers will not only have to open, but will often print and put in a pile to deal with later, when they are ready (just like receiving the paper-based invoice in the mail). This means that the customer may wait as long as they did before to pay the invoice (assuming they do not lose their printed piece of paper in the meantime having deleted their original email). In addition to all of this, an emailed PDF does not encourage the customer to pay by electronic means any more than an invoice arriving in the mail does. Research suggests that customers actually often like to have the option to pay online by debit or credit card for example and can often only do so by calling the merchant (and having to spend time and effort, and within the hours of business operated by the call-centre). Finally, in Business to Business (or B2B) invoicing, the emailed PDF presents a whole new layer of challenges as these often require a digital signature. PDF technology is now much better at allowing digital signatures to be securely added to invoices when they are sent in the mail. However, the process is by no means simple and presents many logistical issues, particularly when multiple approval signatures are required.

Digital invoices

A digital invoice is available at a web site. Sometimes this is embedded in part of a merchant’s web site or it is “hosted” on a third-party web site (to which customers can go directly or can be redirected from a link on a merchant’s web site). In most cases, the digital invoice rendering process is even quicker than emailed invoices, as there is no need to generate a PDF and attach it to an email address. In addition, although a customer may be notified that a new invoice is available via email, it is not necessary to have an email address (as the customer can be notified about the web address by normal physical mail and then subscribe to the web site service to be later notified by either email or even their mobile phone –via SMS). In practice this means that digital invoices will often collect or “scrape” new email addresses from customers progressively.

Perhaps most importantly, a digital invoice is viewed in a truly online way (and does not require printing (as it can be easily stored and retrieved permanently or resent by a merchant at almost no extra cost). This means that not only can the customer view the invoice (in as much detail as they wish) but they can use many online features to both deal with the invoice (save it, schedule it for later payment or send it on for viewing or approval to another person) or even just pay it immediately of course. And if they do choose to pay it immediately, they typically get to do so via their debit card if they want to use their current bank account or by a variety of credit card options (and in some cases even by cash by printing out a voucher and taking it to a local newsagent or local store that takes cash payments). This is therefore much more likely to accelerate merchant cash-flow than in the emailed invoice situation and means that the payment is much easier to reconcile (as less difficult to reconcile cheques or phone-based payments are being made). Finally, the invoice recipient (whether it is a B2C one or B2B one) can elect to pay a bill 24/7 as the bill presentment and payment web site is truly “open-all-hours”.

Conclusion

Emailed invoices are superior to traditional invoices sent in the mail. However, they fall far short of full digital invoices, which offer many additional benefits (which translate into much greater time and cost saving for the merchant). These two approaches are therefore far from equivalent and a merchant can realise considerable advantages by upgrading from an emailed invoice to a full digital one.

The factors that help shape choice in the online payment world

There are now many payments types or channels available to both merchants and customers (cash, cheque, credit card, debit card, pre-paid card, direct debit, Internet direct bank transfer, e-wallet transfer etc). However, they all present different advantages and disadvantages, and these may be quite different for a consumer versus a merchant. However, by drawing together a range of international literature about payment systems and how they are used by people and organizations of all kinds, six attributes of payment products appear to be most relevant to the choices that are made of both merchants and their customers alike*. These six factors are:
capability

• cost
• convenience
• coverage
• confidence and
• confidentiality

Let’s look at each of these in a little more detail.
 
Capability

Capability refers to the functional ability to actually use a particular payment type or channel. For example, capability in cash transactions (the oldest and most ubiquitous of payment types) relates to a person or an organization being in a position to hand over a payment (having cash in an acceptable denomination/currency) and then receive the payment (also in an acceptable denomination/currency of course). This becomes a threshold issue in non-cash payments, which often involve technical issues such as the establishment of a means of communicating over distance, ability to verify the parties in a payment transaction, and many other factors.

Cost

All payment systems involve some costs (including cash). Both consumers and merchants are likely to seek to use lower cost payments if they can. This is especially the case if they can readily know what the use of each payment will cost them (sometimes this is transparent and sometimes it is not of course). The cost of a payment is not always spread evenly between the parties. Vendors of payment products will often seek to make some approaches appear to be no-cost or low-cost to the customer-but this may or may not be true. The cost structures of payment methods also differ; some have a fixed transaction charge while others are proportional to the size of the transaction.

Convenience

Convenience refers to the ease of use or “user-friendliness” of a payment method. A need for registration before using the payment method, or the speed of payment (for example, the time taken to approve a payment) can be factors affecting convenience. Consumers generally view cash as convenient to carry for small purchases at the point-of-sale. This means that to be competitive with cash, electronic payments systems have to offer a high level of convenience (hence all the current interest in mobile phone usage for payments). Businesses however typically have a very different perspective on convenience to that of consumers. They are likely to seek payment products and services that fit reasonably well into their broader processes and systems.

Coverage

Coverage refers to how widely a payment method or system is accepted by merchants and other recipients of payments, such as businesses receiving payments from suppliers. An important objective for all payment types and channels is therefore clearly to be widely accessible to merchants, traders, consumers and other users without high-entry or ongoing costs. Similarly, consumers should encounter as few barriers as possible in undertaking transactions using the chosen system.

Confidence

This refers to a customer’s belief that a payment will be successfully executed and completed, and that the value of a payment method will be respected. Confidence rises where arrangements are secure and value does not ‘leak’. The confidence that consumers have in a payment method also depends on the associated payment channel. For example, online payments with credit cards differ from offline payments, in that the card is not physically provided by the customer and the merchant does not obtain a signed confirmation from the customer. Some card schemes provide a system of cardholder authentication, usually through provision of name, credit card number and expiration date. To prevent illegitimate interception, this information is typically encrypted so as to increase levels of confidence in the payment system. 

Confidentiality

As a payment type only cash maintains payer and/or payee confidentiality. Non-cash payments often involve the collection of information that becomes valuable. Users of payment systems are often concerned about the collection and use of this often personal information, and its potential release to other parties, if not properly secured. For example, in general, credit card payments are made via an identifiable account, resulting in the loss of anonymity. This means that some individuals are uncomfortable or unhappy about using payment types or channels which cannot reasonably protect their personal information (and may increase the risk of theft or fraud).

Summary

Payment type or channel choices are complex for both a given consumer or merchant. However, in this article we have described six factors which seem to be most influential in the decision-making process. Although these factors all stand alone, they are not necessarily independent of one another of course. In other words, the boundaries between factors are often blurred of “fuzzy”.

In addition, it is also worth noting that any one of these factors can be primary, depending on a given individual or organizational perspective. For some consumers and/or merchants therefore, cost and convenience may be first and second (with other factors making little difference). However, for other consumers and/or merchants, capability, coverage and confidentiality may all have equal significance, for instance.

 

*The report by the Australian Government called “Exploration of future Electronic Payments” was extremely useful in assembling and describing the factors in more detail.

Will fees for processing online payments disappear completely?

For many years now, banks and other financial intuitions have been generating revenue from transactional fees of one kind or another. In fact, these fees can make up a large proportion of overall revenues and corresponding profits (in some cases constituting up to 50% of all profits in some banks). 

In general, fees fall into two categories-those that are charged to the end customer or the consumer and those that are charged to an organisation or merchant, when it wants to allow payment services to its customers.

Direct Customer fees

Transactional fees categories typically apply only to the customers of a given bank (as the bank has no direct relationship with other consumers) and even then, only when a customer has gone beyond what is deemed to be the core commercial relationship that the bank is prepared to offer at no direct cost. Hence, fees are typically charged to customers when they have overdrawn an account, written a cheque in circumstances where they are insufficient funds to cover it, or perhaps used an Automated teller machine or ATM in another banks’s network.. However, even here, a bank will allow many transactions without fees, if a customer maintains a positive balance (sometimes with a minimum threshold) or commits to regular income being paid in or saved every month. This is because banks worry a lot about customer “churn” and know that fees can often be a “switching factor” if they become too much of an irritant to an account holder (especially now that opening another bank account can be done online very easily in many cases).  The simple logic here is that it is more cost effective and profitable to keep good customers who transact regularly with a bank (and for the most part in the black) for what might be many years, than to risk losing them completely over a fair but nonetheless irritating fee that “pushes them over the edge”.  Even though this results in what might be seen as a better deal for the end consumer, banks still have to find ways to recover their internal transactional costs in some way. For some transactions, such as  bank cheques, wire transfers and transactions involving foreign exchange a customer will be relatively happy to pay (as these are often one off instances). However, these fees will not always cover the costs involved completely and it therefore often falls to the other major category to provide other fees that can cover costs and the bank’s overhead-the merchant.

Merchant fees

Although every individual commercial merchant relationship will be different, depending on a given organisation’s size, type of business, types of services offered etc, banks will typically charge a very wide variety of fees to most merchants.

The most obvious fees charged to merchants (because they have been around for a long time) are for cash and cheque handling. In both cases, these payment transactions are expensive for any financial institution because they involve human intervention and data entry (sometimes carried out multiple times). As with an end consumer, a merchant may be able to bring about lower fees by maintaining a positive balance or “float”. However, it is rare for any merchant these days to be able to operate without an overdraft at least some of the time, so fees in this area need to be monitored carefully.

Outside cash and cheque payments, the majority of fees that are charged by a bank a credit and debit card use fees. Cards are typically issued to a consumer without charge, and with no transaction fees when they are paid off regularly. However, the merchant will be charged for every transaction that a customer makes with a credit and/pr debit card and this may be a very complex affair. In some cases, the fee charged will be a single “aggregate rate” for say credit card use, such as 2.5% of the transaction size. Hence for a £100 consumer purchase, a charge of £2.50 will be made. However, this rate may vary from one transaction to another and this is because the aggregate rate is made up of many sub fees that every merchant needs to know about. Here are just some of the fee types that are typically charged:

The Discount Fee Rate

Credit and debit card companies (Visa and MasterCard being by far the largest of these) have what is called “interchange” rates. They range in price- so in order to make it easier, the merchant providers created three categories.

Qualified Discount Rate – a pre-set or agreed percentage is paid for each pound charged.

Non-Qualified Rate – a fee added to the qualified discount rate in certain transactions. For example, if a merchant does not use an address verification service (AVS) when they manually enter  or take a transaction.

Transaction Fees

This is a specific, flat rate that is paid on every sale processed through the credit card processor. (Sometimes the transaction fee is called the interchange fee, authorization fee, or per inquiry fee).

Address Verification Service (AVS)

Merchant banks charge a small fee for the validation service to ensure that the billing address provided in the online checkout process matches the issuing bank’s records. Not using this service will result in hefty charges on the processing of the card for that sale.

Batch Fees

Merchant banks require that customers close out their transactions a minimum of one time each day. The batch fee pays for expenses for the gateway or software that accesses the credit card processing network. If you don’t have transactions to process, there is no batch fee to pay.

Monthly Statement or Customer Service Fee

Most merchant banks charge a monthly fee in order to cover their monthly costs of operation (paying their customer service team for example).

Monthly Minimum Fee

Many merchant banks providers require a given organisation to process a minimum amounts of sales per month, or they pay a monthly minimum. Monthly minimums tend to range between £15 and £50 per month.

Gateway Fees

There are fees for internet and mail order merchants to use an internet gateway service such as Authorize.net, although some merchant providers will cover this fee on their customer’s behalf as part of the package deal. If you are solely an internet business, you’ll want to look for an internet merchant account that includes the gateway service as part of the package.

Annual Fees

These are often charged by Merchant banks  when free terminal equipment to take payment is offered. There are numerous merchant account providers that do not charge an annual fee, so you may want to shop around if the first few you look at require an annual fee. Sometimes it would be cheaper to purchase the equipment than to pay an ongoing annual fee.

Cancellation/Termination Fees

Most merchant accounts require a contract agreement of one or two years and if you cancel early, you are likely to be charged a termination fee.

Chargeback/Retrieval Fees

When a customer requests a refund (or the customer’s credit card issuer requests a refund), merchant account providers typically charge a “chargeback” fee.

Paperless billing-a cost effective and sustainable solution?

“Eco friendly” and “budget friendly” don’t always go hand in hand. But paperless billing is one of those rare measures that checks both boxes – all while keeping customers happy.  This is simply because getting a bill to a consumer in a traditional way takes lots of time, effort and money that can be avoided. However, by using modern internet technology, the bill issue time can be reduced, the effort to get the bill out can be lessened and costs can be squeezed or in some cases eliminated.

Let’s look a look at some of the specific wins:

Any business of any size or type wins on cost.  On the direct or visible cost side, there’s less paper, less envelopes, less ink, less postage. Even though these are often significant in and of themselves there are also big potential cost reductions on the indirect or more hidden side of things...less customer support (handling queries or phone-in payments) and much less time spent on reconciliation. In addition, online bill presentment and payment has been shown to lead to much quicker settlement by the customer-which substantially aids cash-flow for a merchant. All these savings add up.

The customer wins – This includes eliminating or simplifying the tasks of organising bills, querying them and being able to make payments (all being possible safely and securely at a single web site typically with a few clicks). Paper free means more free time for the bill payer, and less to worry about when dealing with paper (including having to put the bill or invoice somewhere safe, finding it when needed and even losing it occasionally).

The environment wins.  Paperless billing is a simple but significant step that every business can take with a little focus, effort and determination.  Less paper means less use of trees and less transportation (and petrol), reducing a merchant’s carbon footprint. Not all customers will be happy to turn off paper immediately but some will and they will slowly encourage the others to do the same.

So Paperless billing  is a worthy goal for all merchants
Whether you’re a large merchant billing tens or hundreds of thousands of customers, or a small business raising a handful of invoices, on-line billing at an aggregation site (such as PaySwyft) is a pain free way to trial the paperless option.

Merchants can raise some or all of their bills online...or test dual billing with late payers and measure the impact on cashflow...or if they prefer, give customers a straight choice: paper or paper free.

Paperless Billing: at a glance:

Merchants are saving money on...

·        Printing paper bills

·        Fulfilment, postage and franking

·        Undeliverable mail

·        Chasing late payments

·        Handling manual payments

·        Archiving paper bills

·        Reconciliation/bill matching

Customers are saving time on...

·        Checking and paying bills

·        Hunting for previous bills

·        Checking funds and means to pay

·        Writing and posting cheques

·        Waiting for a merchant to be open for business

·        Talking to customer services

·        Worrying over lost cheques and late delivery

Will Mobile Phones Become the Dominant Channel for Bill Delivery?

 
There are now a multitude of channels available to customers to pay their bills. These channels include:

1. Print and mail (paper-based)

2. Fax

3. Email with embedded data

4. Data interchange (system-to-system)

5. Email with PDF and/or link to on-line

6. Online (customer portal)

7. Mobile (MMS; HTML; WAP; USSD)

8. Mobile via App

9. Mobile Tablet

10. Emergent technology (via cable TV etc)

 

Only print and mail on the above list existed as an option until around 30 years ago when fax arrived and 25 years ago when email came along (both of which still have quite a strong following today). Data interchange options were mainly evolved and used in the B2B rather than direct Business to customer or B2C space but again are still around today as a strong channel, supported in the main by large international software companies, who have sufficiently large installed volumes to want to protect their position in the billing market.

Web based technology has driven the greatest change in the billing space in the last 10 years or so and seen the emergence of both consumer and merchant portals (for presentment and payment) and the use of mobile technology as 3G and 4G have made the internet available to mobile phones.

 
Even though each of these channels presents a new and perhaps better and more convenient choice to a given customer (and are often presented as the channel to replace earlier channel choices) in reality, they are often just additional options. In other words, consumers have shown time and time again that they like the extra choice but do not necessarily want to be driven too quickly to only one channel (however “efficient and effective” it is presented to be).
 
The implication of customers wanting lots of channel choice to both view and pay their bills is that the same bill may need to be presented and rendered possible to pay in several channels, at least for now.
 
Today’s challenges
Some technology experts are starting to say that customers will be move rapidly away from e-billing to m-billing (m for mobile of course) in the next few years. Modern mobiles can certainly handle very complex tasks today - just look at the hundred of thousands of Apps available for all different platforms. These Apps can do complex tasks, even generating bills “on-the-fly”. A mobile can also handle a simple task such as bill presentment with ease today – in some cases on quite a detailed basis (even though reading it may present quite a challenge!). However, viewing a PDF bill attachment on a mobile (as opposed to a tablet) is often a long scrolling exercise, making it impractical in most cases. There is a solution to this but it needs the biller to solve the problem of displaying their bills in more flexible ways according to the kind of mobile platform to which it is being delivered. In this way, a customer can see a simple version of the way and then “drill into the detail” as they wish when they want to see itemisation. 

However, perhaps all of this is a false dilemma. In the final analysis, customers do not care if a bill is delivered to their computer, their tablet or their mobile (or even all three). In fact, many want to see it delivered in as many ways as possible to allow maximum flexibility, including by email or by PDF attachment and even in the physical mail or fax on some occasions. This multi-channel approach is therefore a customer centric approach. The challenge for billers then is how to provide as many of these channels as possible at the lowest coat possible. In the end there is only one solution to this –use a full digital bill presentment and payment portal such as PaySwyft for example. This not only means that a bill can be sent in all 9 of the current channels above but means that a biller would be well-placed to take advantage of the new emergent technologies that will come along as in the near future.