Electronic billing has been around in one form or another for over a decade now but according to the Swiss billing research firm Billentis, the penetration of e-bills versus traditional bills remains relatively weak. They estimate the proportion of e-bills to be anywhere between 4% and 9% of the total invoices sent out, but even this range applies only in relatively large businesses (and is increasingly invisible in medium and small businesses), making the overall take up perhaps nearer half of these figures. Furthermore, the proportional take-up of e-billing varies greatly in the two major parts of the market-the Business to Consumer or B2C market, and the Business to Business or B2B market. In this brief article, the aim will therefore be to try to quantify the relative size of the billing market, or perhaps more simply to determine just how many individual bills or invoices are sent out each year and to whom they are sent.
The table below illustrates the typically billing flows, in percentage terms, in these two major market sectors (B2C and B2B) and according to whether a company is large, medium-sized or small.
Although bills can be sent from one consumer to another (C2C), this is a relatively small market (estimated to be less than 1% of all bills). The two large sectors are therefore between businesses and their consumers (B2C) and between businesses (B2B). The B2C and B2B market is close to 50/50 but the B2C market is slightly larger in transactions but quite a lot smaller in terms of transactional value. Let’s look at these two markets in a little more detail individually.
The B2C market
As the above chart shows, large businesses send out the greatest proportion of B2C bills (43.3% of all bills). Medium sized companies send out only 5% and small or micro companies only 1.7%. In the UK as an example, the estimated total volume of bills is around 5 billion per annum. This means that large companies with more than 250 employees send out 2.165 billion bills. Given that the UK adult working population is around 26 million, this means that each consumer gets 80 bills a year on average, from a large organisation of one form or another or around 7 bills a month. They get a further 1.5 bills from medium and small companies, making an average of 8.5 bills a month in total.
As a different example, in the US, the estimated total volume of bills is around 42 billion per annum. This means that large companies with more than 250 employees send out 18.18 billion bills. Given that the US adult working population is around 130 million, this means that each consumer gets 140 bills a year on average from a large organisation of one form or another or around 11.5 bills a month. They get a further 2.5 bills from medium and small companies, making an average of 13 bills a month in total. The higher average consumer bill volume versus the UK may be explainable by two major factors. Illegal workers in the US are not counted in the adult working population figures and the US has Federal and State based system businesses, making for less truly national “super-billers”. For example, in a large utility may bill a large % of the UK population for its gas and electricity needs (a task that may involve a hundred utilities in the US). This makes the average bill volume artificially higher than it may be in reality, perhaps by as much as 15%.
In terms of value, there are no accurate figures relating to the average bill size or amount. However, it is estimated that the average “ticket” in the B2C market is around £65 to £75 (or $75-$95 in the US).
The B2B market
As the above chart also shows, large businesses send out the largest proportion of B2B bills (11.6% of all bills) to other large companies but medium sized companies (employing 50 to 249 employees) send out almost as many at 10% and even small companies account for 7.5% of the total. However, the picture is complicated further by the additional B2B billing that is done between Large, medium and small companies. Hence, in aggregate, large companies send out 15.8% of all bills (11.6%+1.7%+2.5%).
Once again using the UK as an example, this equates to 790 million bills. In the US this would be 6.64 billion bills. Just to complete the picture, medium companies in aggregate send out 18.3% of all bills and small companies in aggregate send out 15.9%. Although this makes the B2B transactional volumes very similar, in aggregate the medium sized companies send out proportionally the most bills.
In terms of value, accurate figures relating to the average bill size or amount are even harder to come by, as companies have very high variations from very low amounts (such as £15 0r £25 for example) to very high amounts (running to thousands or hundreds of thousands in some cases). In addition, there are no formal records kept in terms of average B2B invoice amounts. However, it is broadly estimated that the average “ticket” in the B2B market is around £1500-£2,000 (or $1250-$2500 in the US).
The penetration of ebilling
Once again, definitive figures are difficult to find when it comes to the penetration of ebilling. However, in the B2C market, it is large companies that have made the most progress, led by utilities and telecommunication/mobile phone companies typically. Here, the estimates are that penetration has been in the range 7-9% in Europe, and a little less (6-8% in the US). In medium companies, these numbers are reported to be less than a third of these figures or only 2-3% penetration and in small companies, considerably less than 1%. This leaves a lot of upside potential to switch to ebilling of one form or another across all three organisational size levels.
In the B2B market, it is apparent that accounting software and separate specialist billing software has made some significant inroads into large companies. However, this has largely translated into accounting system driven invoices (or email based invoices with PDF attachments, which are but fully digital bills of course) and as often as not, this has therefore become an additional channel to paper-based invoices, with many organisations reluctant to eliminate physical invoices too quickly. There are also many additional complexities in the B2B market when it comes to billing. This includes integration with purchase order systems, dealing with credit noting, bill line-item dispute handling and multiple decision-maker issues for bill sign-off. This is not to mention the accurate and legal handling of taxation issues. All of this means that the decision to take up ebilling in the B2B space usually involves quite high up-front capital expenditure (on new or changed software), long integration times, changed internal processes and the need to cover monthly fees (e.g. software maintenance and per user etc). There are alternatives to this approach but as yet, interest and take up has been very low.
Summary
A lot of bills are sent out every year in any country with a reasonably well-developed economy. However, it is important to understand that the B2C and B2B markets are very different in terms of transactional volumes, average “ticket” sizes and needs. It is also important to recognise that volumes vary greatly in large, medium and small companies, and their relative interest in making their invoicing practices more efficient will often be very different. This means that the potential for electronic billing take-up is still very high (perhaps as much as 95% of all bills are still not fully digital) but the route to increase overall levels of ebilling take-up needs to be carefully planned for each market segment, in order to be successful.
