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 checks 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 check 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-center). 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 checks 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 realize considerable advantages by upgrading from an emailed invoice to a full digital one.

Electronic billing and payment-a win-win for everyone?

Electronic billing and payment is one of those rare organizational change measures that can create a number of so-called win-wins. The merchant wins on efficiency and effectiveness (and with the right solution on the cost side too) and the customer wins on speed and convenience (and can save a little money as well). Let’s briefly look at why.

For the merchant on the direct or visible cost side, there’s less paper, less envelopes, less ink and less postage when customers elect to discontinue getting a paper invoice. Even though these are often significant in and of themselves there are also even bigger 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 and settlement. 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 significantly on the merchant side.

For the customer they win by eliminating or simplifying the tasks of organizing bills, querying them, and storing them (in a good online system forever) and being able to make payments in many ways (all being possible both safely and securely and at a single web site, and ideally only with a few clicks). Digitally-based billing and payment 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).

And above and beyond the merchant and the customer in the relationship, the environment wins too.  Electronic billing is a simple but significant step that every organization can take with a little focus, effort and determination, and encourage their customers to make a small “green” contribution of their own.  Less paper eventually means less use of trees and less transportation (and gas), 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, in summary merchants will save money on:

•                  Printing paper bills

•                  Fulfillment and postage

•                  Undeliverable mail

•                  Chasing as many late payments

•                  Handling manual payments

•                  Archiving paper bills

•                  Reconciliation/bill matching/banking payments

And customers will save time on:

•                  Checking and paying bills

•                  Hunting for previous bills

•                  Checking funds and means to pay

•                  Writing and mailing checks

•                  Waiting for a merchant to be open for business

•                  Paying by IVR or phone

•                  Worrying over lost checks and late delivery

And all this is “green” too.