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.

Finding and Using the Right Invoice Template

If you type “free invoice template” into the Google search engine you get about 40 million returned results. Clearly then there is a lot of interest in trying to find and use an effective invoice process (and ideally a cheap or free one) so in this article we will explore what is available and what options appear to deliver the greatest benefits.

Whether you are a one person business or a giant multi-national, getting an invoice to a customer is the beginning a long process in getting paid. Hence, it is important to get this invoice to a customer quickly (once a product has been supplied or service rendered) but it is equally critical that it is clear and encourages the earliest possible payment.

Fifty years ago, hand-written or simply typed invoices sent through the mail were the norm. Today, we have many other options (although these old-fashioned practices have far from disappeared completely). Perhaps the simplest of these is to use an pre-designed template and popular desk top applications like word for windows and an excel spreadsheet package both have several design alternatives to choose from. In both cases these provide a well-designed looking invoices and provide prompt space for particular customer names, address details, product or services provided and the cost involved. They even allow space for logos to be added if desired. 

Outside the standard templates of desktop applications, there are many relatively cheap and even free software packages which allow invoices to be generated. These work in similar ways to desktop templates but may also generate sequential numbers and allow better storage and retrieval (and avoid the mistake prone process of overtyping the last invoice that was typed).

In both of the above alternatives, the problem is that despite the fact that the invoice can be sent by email as an attachment is still only received as a piece of paper (which the customer can do little with when they receive it and may only print in order to later pay in any case).  As a result, perhaps the best alternative of all is to use a bill presentment service which renders the invoice as a full digital bill. This allows individuals to click on an electronic bill at a web site (ideally rendered in graphical form as they would expect to see it as it appears when posted) and either reveal more bill detail, store it, end it on to someone else to review and most importantly to pay it.

For example, at the PaySwyft web site (www.payswyft.com) sole traders, partnership and companies or all sizes can click on the “free invoice template link” on the home page and use the system to generate an invoice at no cost whatsoever. Like the options described above it provides an clear and clean process for entering invoice details but this is rendered as a full digital bill, meaning that it can be clicked on dynamically to see as much detail as has been entered and perhaps more importantly, it can be paid from within the browser, also electronically. The added bonus here is that the single invoice can then be used (when saved) as a template to generate future invoices much more quickly (because a logo has been added and the design of the overall invoice is relatively set).

What is the difference between “push” versus “pull” on-line billing?

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). 

Developing a Payment Strategy-Step 4- Making as much payment choice available as possible.

In exploring what is involved in developing an overall payments strategy, in this article we will look at the fourth phase of five in total, which is making as much payment choice available to customers as possible.

Every organisation wants to get paid (and as quickly as possible) but there are clearly many ways in which this may be done by customers. This creates an interesting dilemma. On the one hand, by keeping payment choices to a minimum, complexity is reduced for the organisation but flexibility of options is decreased for the customer. On the other hand, a wide array of payment options creates high customer choice but with a high degree of handling complexity for the business. In the past, the size of the average transaction, the billing cycle frequency and the volume were the main determinants of strategy here (and may have favoured fewer payment choices such as cheque and direct debit only for instance as a way of keeping things simple and processing costs low) but with the more widespread use of the Internet for payments in recent years, the balance towards greater customer payment option choice has become much easier and therefore compelling. 

Offering a wider choice of payments incorporates not only varying payment channels but also a variety of payment types. Different channels include the traditional ones of mailed-in cheques and direct bank transfer (direct debit or standing order) but these days can often also include operating a central call centre (in-house or outsourced), automated telephone services or payment via the web (at a company built or third-party site). Different types of payment include cheque, cash and bank transfer, but can be easily extended to a wide variety of credit and debit cards, pre-paid cards and e-wallet transfers.

Internet technology now allows considerable flexibility for an organisation of any size to offer most of the above channels with a web site at the hub of the offering. In addition, an e-payment gateway can now be relatively easily added to enable credit side and debit side, options, as well as e-wallet payments to be taken online. Perhaps even more attractive to an organisation is adding a reputable third-party electronic billing and payment aggregation destination site (such as PaySwyft) as an offering in the overall mix. At such a site, an organisation can present all of its bills in digital form and then allow these bills to be paid with almost every available payment type, including cash in many cases. Because the aggregator takes the payments, collects them together electronically and then settles to its merchants online also, this helps to drive down the internal expense of payment call handling and the acceptance and reconciliation costs of handling cheques (and any other paper-based transactions).

Whatever approach selected by an organisation, today’s customers prefer a variety of payment options to be available meet their different and often changing needs when it comes to paying invoices. The reward for making this available is quicker settlement and thereby accelerated cash-flow. A wise business therefore finds the most cost-effective ways to offer as much choice as they can.

In our next article in this series, we will look at the next phase in developing the Payment Strategy- Building a seamless payments process.

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. Customer Web 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 cost 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 nine of the current channels above (and can be paid at the same portal) but means that a biller would be well-placed to take advantage of the new emergent technologies that will come along in the near future.

Should public sector organisations care about introducing e-billing?

Electronic billing (or E-billing for short) has now been around for several years and has been introduced in businesses like large utilities, telcos and many smaller commercial organisations (such as accounting and legal firms). However, it seems the switch to some form of e-billing has occurred mainly in the private sector and only in a limited way (if at all) in the public sector. In this blog article, we will explore why this is the case and whether this is because the barriers to adopting this approach are different in the public sector or perhaps that some of the benefits may not apply.

The “public sector” is obviously a catch-all term and one which envelopes large national government departments such as defence (including all the armed forces), education (including state run schools and colleges), employment, social security or tax) and smaller local government entities such as urban and rural councils. In addition, it also includes more directly community-focused organisations such as hospitals (of all sizes and kinds), the fire service and the police, etc. Clearly, this represents a wide range of very diverse types of organisation whose needs are likely to vary greatly when it comes to the flow of money in an out. Of course, not all of these organisations send out a bill or invoice or even provide a receipt. However, they all buy products and services of one kind or another and will often have some kind of internal charging method for services rendered (however infrequent this may be). This means that the vast majority of public sector organisations receive or issue bills (especially where they deal with consumers directly) and the volume can be very high. This is true of large council organisations, medical clinics and tax departments for instance and in some single organisations can run into millions of bills each year. For example, both the British Broadcasting Corporation (BBC) and the Driver Vehicle Licensing Centre (DVLC) in the UK issue over 20 million bills a year to consumers alone. We will therefore assume that for the purposes of this article that we are referring to the whole public sector, which includes Government to Government (G2G), Government to Business (G2B) and Government to Consumer (G2C) billing.

Based on the volumes of invoices generated (estimated to be over 2 billion bills/ invoices a year across the entire UK public sector), the automation of billing and payment collection processes (to create greater efficiency) should be a primary concern of most governmental entities. However, the evidence suggests that the generally slow take up of new approaches and online technology in particular has arisen from both many perceived barriers and a lack of perceived benefits versus commercial companies. Let’s therefore look at each of these factors in turn.

The Perceived Barriers
Although there are others, there are five main perceptions that public sector organisations often have about e-billing and payment. These are listed below:

The Perceived Benefits
A manager in the public sector can review the commonly perceived benefits of e-billing as easily as a private sector manager can do so. However, he or she may feel that these benefits may not apply as much or even at all in some cases. In the chart below, we have listed six of the major perceived benefits of modern internet based e-billing and payment portals (again such as Payswyft for example) and commented on the likely applicability of each to both private and public sector organisations.

In addition to the above benefits in each of these six categories, online presentment and payment portals provide for many other valuable features. This includes, easy upload of accounting data files (by many means), file transfer compatibly, to and from all major accounting systems, convenient and useful transactional analytics and cheaper bill-storage and retrieval. In fact, public sector organisations are often required to be able to store and retrieve many years of bills and transactional records, which can now all be done in the third party online bill presentment and payment portal. This means that bills can be easily found, referred to, appended with notes or even resent and a very low cost to the organisation in question.

Every one of the above ultimately can potentially create a much more user-friendly process to send a bill and get it paid for both the organisation and its payees (whether these are other public sector organisations, businesses or consumers). Furthermore, many of the legitimate barriers to entry of the past seemed to have disappeared and the benefits of making the change are now clearer. For this reason, e-billing should now be a key strategy for every public sector organisation.


This article was written by Dr Jon Warner of Payswyft (at www.PaySwyft.com). Jon has extensive senior executive experience and has led organizations in a variety of industries through significant transitions to achieve bottom-line results. He is an expert in developing and implementing strategies in operations, marketing, sales, and corporate turnarounds. Jon is currently CEO of PaySwyft in the UK (an innovative on-line billing and payment business) and Chairman of WCOD (a management consulting and publishing business). He can be reached at jon.warner@payswyft.com.

Can a Third-Party Digital Billing Company Put Big Savings on the Bottom Line?

In a recent article, we broadly confirmed that a general claim of the international billing and payment research companies was true for two companies (one small and one large) and that it is therefore likely to apply more widely. This claim is that on average every organisation spends around 5% of its revenue on issuing invoices and collecting payment for them. Now that we believe this claim to broadly accurate, in this article I want to test the claim of some third-party electronic billing and payments companies that they can make cost savings of up to 50% if their clients adopt a fully digital billing and payment service. At the full 50%, this would mean that up to 2.5% of a given company’s revenue would be saved. And as the large company in our previous article had an annual turnover of £90 million, this would amount to a whopping £2.25 million (and that’s certainly worth having as recurrent additional income).

To properly analyse this situation, we first need a few facts. In the information below therefore are some statistics about the company which we called Beta in the earlier article:

What this chart tells us immediately is that Beta spends slightly more than 5% of its revenue on issuing invoices and getting them paid, with 43% of this £4.62 million cost being on the staffing side and 57% being on the transactional cost side. So, now that we know this, where is the particular scope for savings, taking each of these two headings separately?

A) The Staff side savings potential
By moving to a fully digital billing solution, there is an expectation that many more people will be happy to both get/view their bills or invoices on line and pay them by the same means. However, this is not going to be the case for all customers and even for those who do make the transition, it takes time. For our purposes here we will therefore estimate potential take up after a three year period, at which point, 50% of Beta’s customer base is happy to view their bills online and half of these (or 25%) are happy to pay online. For simplicity we could say that this is a switch of 35% of the customer base to online billing and payment (the other 65% staying with previous practices and methods).

The implications of the above is that Beta cannot cut or redeploy its staff too aggressively, as the majority of customers still need to be serviced in the old way. However, we can nevertheless estimate that staff man-hours necessary to tackle the new workload (and therefore numbers needed) are reduced as follows:

Accounting: The 50% of customers now viewing their bills on line and the 25% paying by online means, allow much easier settlement and reconciliation, with electronic records at every step, less errors and much easier analysis of data (because the digital billing system can be used for the entire customer billing process and not just part of it). As a result, the people handling invoicing and payments could be reduced to a manager plus four accountants at Beta (a reduction in staff of 38%).

Clerical staff: Quite high numbers of clerical staff are needed at Beta to handle the 25% cheque and cash mix, general data entry (with records often being keyed two, three and even four times on occasions) banking and the chasing of invoices when overdue. Because there is also likely to be faster payment in the electronically paying customer base, this reduces the amount of time chasing late payments. In summary, data administration is simplified considerably across the whole system. As a result, the people handling invoicing and payments could be reduced to a manager plus fifteen clerks at Beta (a reduction in staff of 39%).

Call-centre staff: 50% of all Beta’s payments are taken on the phone, where service agents have to find the customer data and invoice, take the payment manually and payment data to a system of some kind. With a fully digital solution being used by 50% of the customer population, and half of these paying on line, the burden on the call-centre is reduced by 25% (as there is no need to contact the call-centre anymore for these customers). In addition, call-centre staff may be able to convert more and more customers to online payment by showing them the digital invoicing and payment system and pointing out that this is available 24/7, 365 days of the year-and not just 9am-5pm call centre hours. As a result, the people handling invoicing and payments could be reduced to a manager plus forty agents at Beta (a reduction in staff of 30%).

All of the above adds up to staff savings (even with a lower overhead recovery now of 40% as there are less offices, desks, computers etc needed) of £730,056.

B) The Transactional cost side savings potential
We have assumed no change in Beta’s business in terms of revenues and overall transactional volumes (and therefore average cost of each transaction). There are, however, two major changes that a digital system is likely to bring:
1. A change in bill presentment costs
2. A change in the mix of payment types being used

Bill presentment costs: Now that 50% of the customers are viewing their bills on line, it is reasonable to assume that they are happy to see paper “turned off”. As Beta were emailing invoices previously this was a preparation cost mainly (on the staff side) but it does allow the opportunity to send statements electronically as well as give customers copy invoices in the new digital system forever as a free service. This means that paper and envelope costs would reduce, as well as the need to store physical paper copies within the Beta organisation or externally (so costs of storage space are reduced also). Perhaps more significantly, the marketing material send in the post by Beta can now be put online for half of the customers (where it is presented without the cost of having to send it out). All up, savings in all of these presentment areas for Beta are estimated to be £481,035 per annum.

Payment costs: In the new world, a fully digital presentment and payment solution is likely to half Beta’s volume of cheques and eliminate the use of cash completely (even though the option to pay by cash may still be available to customers in some solutions –such as the one offered by PaySwyft). On line bill payment however goes up to become 15% of the total mix (with the other 10% coming from credit and debit card payments that used to go through the Beta call-centre). This adds a transactional cost of £0.50 per invoice to Beta, or £116,379 per annum, but it is more than offset by savings elsewhere. The greatest of these is in the float costs of the business. Because online payments are known to get to customers quicker and lead to faster payment, cash flow is accelerated and days outstanding are reduced (in Beta’s case from 45 days to 38 days (a drop of 22%). This contributes a total of £123,288 in annual savings to Beta. In addition, the often linked costs of having to handle bounced cheques, chasing debt and writing off unpaid invoices, diminishes considerably, adding another annual saving of £387,931.

If we add all the transactional side potential savings up, the total is £924,908

Summary
So, on the staff side we have estimated total savings of £730,056 and on the transactional cost side estimated total savings of £924,908. This makes a grand total of £1.652 million in savings per annum (recurrently) or 1.84% of revenue. Hence, the claim that a good digital billing system can save a company 50% of its costs (or in this case 2.5% of revenues) is not quite met here. However, with the potential to add more savings over future years as more and more customers switch to the new online system it would get very close to the 50% target and make the switch to digital billing still seem like a very good idea.

To make the above figures easier to see at a glance, a summary of all of the above is presented in the table below:

Sending Bills and collecting payment from customers costs every organisation 5% of Revenue on average!-can this really be correct?

According to several leading research companies who look at international billing and payment issues on an ongoing basis, (including perhaps the leader in the field of billing research -Billentis) they say, that on average, the overall cost of sending out a bill or invoice and then collecting payment from the customer, is anywhere from £4 to £17 per invoice. Unfortunately, apart from the fact that this is a pretty big range, it tends to create an unnecessary defensiveness in organisations (and often in the finance department in particular) who understandably become very keen to point out that they spend nowhere near that kind of money on such a mundane and clerical activity (although they will often fail to include many of the indirect and hidden costs of the process). Another recently published general statistic, however, could be much more useful and may make a few divisional heads and even CEO’s sit up and think about the efficiency and effectiveness of their billing and payments practices for the first time. This is the statement that on average, an organisation spends 5% of its revenue on issuing its invoices and in collecting payments from customers. In this article, we will explore this claim and see if it reflects reality for both small and large organisations. To do this we will look at the figures based on two real UK businesses.

First and foremost let’s deal with the “on average” part of the 5% of revenue claim. What is being done here is to look at many organisations of many sizes and types and simply working out the median or middle value in a range of numbers. In this case the median cost of billing and collecting payment in proportion to total revenues is 5%. Of course, this means that they are some companies that may be higher or lower than this but statistically, we can say that around two-thirds of all companies would fall into this average of 4%.

The Small Company
The first company (let’s call them Alpha) employs 26 people, has a turnover of £5 million in total revenues per annum. This is earned by selling goods and services at an average of £500 on average each time. Hence their total bills in a year are 12,000 or 1,000 per month. There are two broad cost categories that we now need to look at –staff and transaction costs.

On the staff side, Alpha have one accountant (on a salary of £45,000 per annum, three clerical admin people (at a salary of £21,000 each) and two people answering the phones (at a salary of £17,500 each). Hence, the all up payroll for this group of people is £143,000. The three clerical admin people devote all of their time to billing and payments but the accountant and customer service people devote only 50% of their time to this activity. Hence, we can say the cost of the people’s time which is devoted to billing and payments is £103,000. However, the company has staff overhead costs of 40% (cost of offices, equipment, training etc) which brings this cost up to a total of £144,200.

On the transaction cost side, 40% of the 12,000 bills are paid by cheque, 10% by BACS, 30% by phone (half by debit card and half by credit card), and 20% by cash. For cheques the bank charge fees of £1,200 (£0.25 pence times 4,800 cheques). For BACS, a charge is made of 15 pence per transaction (so £0.15*12000*0.1 or £180). For cash handling the bank charges a flat annual fee of £500 for all cash deposits of this size. For cost of transactions by phone, on the debit side the company pays £0.35 pence per transaction or £630 and on the credit side 2.5% of each transaction value (£500*0.025*1800 transactions or £22,500). Finally, we have to worry about how long it takes to get paid (and the cost of borrowing money to operate and allow for possibly late payments). Given that this small company has average invoice days outstanding of forty, they have to cover this £500 for 40 days or just under 11% of the year. As Alpha is paying interest at 5%, this means the cost to fund the necessary float is £26,027.

There are also a few direct invoicing costs for Alpha to bear including printing invoices, paper, envelopes, stamps and even marketing material (to also design and print). This adds up to a total of £0.90 per invoice (the stamp alone being half of this). We therefore have a total annual cost of £10,800. This makes the grand total on the transactional side of things £61,837. If we total all of the above, we now have a grand total billing and collection cost of £206,037. As a % of the £5 million in revenues this is 4.12% (or what would be £17.17 per invoice).

The Large Company
The second company (lets call them Beta), employs 525 people, has a turnover of £90 million in total revenues per annum. This is earned by selling goods and services at an average of £58 each time. Hence, their total bills in a year are 1,551,725 or 129,310 per month on average. Once again, there are two broad cost categories that we now need to look at –staff and transaction costs.

On the staff side, Beta have a team of eight accountants (on an average salary of £48,000 per annum each, thirty-two clerical admin people doing bookkeeping, settlement and reconciliation (at a salary of £23,500 each) and a call-centre with sixty people answering the phones (at a salary of £18,500 each on average). Hence, the all up payroll for this group of people is £2,214,000. The Beta company does not keep detailed records but estimates that billing and collecting payments occupies about 60% of the time of this whole team. Hence, the cost of the people’s time, which is devoted to billing and payments is £1,347,600. However, the company has staff overhead costs of 45% (cost of offices, equipment, training etc) which brings this cost up to a total of £ £1,954,020.

On the transaction cost side, 20% of the 1,323,530 bills are paid by cheque, 20% by BACS, 50% by phone (half by debit card and half by credit card), 5% by cash and 5% via Beta’s Internet bank site portal. For cheques the bank charges fees of £52,941 (£0.20 pence times 264,706 cheques). For BACS, a charge is made of 12 pence per transaction (so £0.12*264,706 or £31,765). For cash handling the bank charges a flat annual fee of £15,000 for all cash deposits of this size. For cost of transactions by phone, on the debit side the company pays £0.30 pence per transaction or £99,265 and on the credit side 1.8% of each transaction value (£58*0.018*330,883). transactions or £405,000). Finally, we have to worry about how long it takes to get paid (and the cost of borrowing money to operate and allow for possibly late payments. This company has average invoice days outstanding of 45, they have to cover this £68 for each transaction for 45 days or 12.3% of the year. As the Beta company is paying interest at 5%, this means the cost to fund the necessary float is £553,500.

There are also a few direct invoicing costs for Beta to bear including sending invoices (which Beta does via email not paper unless it is requested by a customer), monthly mailed statements and accompanying marketing material (to also print and design). This is a total of £0.40 per invoice. We therefore have a total annual cost of £620,690. This makes the grand total on the transactional side of things £1,860,054.

If we total all of the above (all staff plus all transaction costs), we now have a grand total billing and collection cost of £ £3,814,074. As a % of the £90 million in revenues this is 4.24%. (or £2.46 per invoice).

Summary
Although the data from these two very different sized companies cannot in any way constitute a statistically significant result, it is nonetheless quite remarkable that both costs of invoicing and collection are so close. At 4.12% and 4.24% respectively they are also only a little less than the 5% average claim made by the research companies. In fact, it is a reasonable assumption that a few more “hidden costs” still need to be added to both sides here (which may completely close the gap). For example, the small company Alpha added no costs for the senior managers (GM and CFO) who both spend some of their time in payment matters, nor for the extra bank charges for bounced cheques, debt collection and writing off-unpaid invoices (issues also not included for Beta). And, in the large company, there were some system and invoice storage costs that were excluded. This may well have made both % numbers even closer to the 5% figure and possibly slightly higher.

In the final analysis, this is just the data from two individual companies. However, they seem to provide a useful general justification to the claim and serve as a basis for calculating the actual figures for almost any business. This may be especially useful ahead of talking with online digital bill presentment and payment companies that often claim that they can reduce these costs by up to 50%-if this is true, what a great way to lift revenues by up to 2.5%!

Who Will Win the Online Billing and Payment War?

In the last 2-3 years, large research companies who focus on Internet trends in billing and/or payments, such as Ascent, Aite Group, Billentis, Forrester, Javelin Research, and several others, have suggested that a “war” has broken out to try to win the race to control most of the online billing and payment transactions (at least it seems to have done so in much of the developed world). This war is apparently between 3 parties –The “consolidators”, the large billing merchants themselves (usually called “biller-direct”) and the “aggregators”. In this brief article we will look more closely at this on-line billing and payment “war” and try to assess who seems to be leading or lagging in their efforts to emerge triumphant.

Introduction
The capacity to send an invoice via online means, and to facilitate payment of it electronically, is a relatively recent phenomenon. In reality, this has only been possible for around 10 years or so, and has only become broadly available as fast Internet access has become widespread and Internet banking has been taken up in far greater numbers. However, we need to separate online bill presentment from online payment. Research suggests that true online bill presentment (a digital bill/invoice capable of showing full detail as needed) is used by less than 5% of the adult population in the US for example (and may be as little as 3% in the UK). And as the chart below on preferred payment channels suggests, only 13.2% of the US population (at least in 2008) actually pays bills online (around two-thirds of which is via a bank and the customer’s linked checking account). This may have increased a little in the last couple of years but not by very much.

©Ascent Group: 2008

So, despite the fact that over 80% of the adult population now has Internet access in the US and the UK, there is still huge potential to switch people from sending cheques in the mail, bank drafts, in-person payments and even phone-in payments in the future (a total of around ¾ of all payments). For this reason, there are a wide variety of companies trying to win control of this potentially large and lucrative sector but the strategies for doing so are quite different. Let’s look at each one of what we see to be four different categories with a unique approach.

1. Consolidators
As the overall chart on the next page illustrates, consolidators are those organizations that seek to show a number of usually large merchant bills, as line items on an Internet web site. As most consolidators are banks, or at least large financial services firms, this is usually an extension of the bank’s internet payment web-site, and allows customers to immediately debit funds from a current/checking account to pay a bill (such as an electricity or telephone bill). It is actually rare for a consolidator to offer other alternative payment options, and it is even rarer for a customer to be able to see a full bill. This means that they can usually only remit a payment for a bill that he or she has received in the mail or by email (so that they can enter the payment information needed).

In recent years, the larger consolidators have penetrated the market well for this relatively basic service. However, they only have limited growth potential with a full presentment facility, which in any case is typically restricted to their own customer base or bank account holders.

2. Biller-Direct
Larger merchants (utilities, mobile phone operators and cable companies, for example) will often allow customers to both see their bill online in a part of the merchant’s web site and pay it (possibly by several means on the debit and credit side). However, to create this functionality for their customers, these merchants have to either build the handling software themselves, or buy it in as a package from a software vendor. This entails up-front capital, time to design and integrate the solution, as well as the effort to train internal staff to use the new system, once built.

From a customer perspective, this approach does afford the benefit of non-standard business hours access and some extra payment flexibility in some cases. However, there are also several drawbacks. These include some very unfriendly sites (buried/hard-to-find information, pop ups, missing detail, etc) and general customer irritation at having to remember each merchant’s site login and password process each time. For this reason, most large merchant biller-direct sites have relatively low levels of customer conversion (5% or less). In addition, the high cost of set-up makes this an unattractive approach for small to medium sized merchants to consider.

3. Consumer Aggregators
Aggregators are typically specialist organizations that have been set up to both present a bill and allow it to be paid online on behalf of a group of usually large merchants. If well-run and focused, consumer aggregators typically have considerable scope for future growth because they can theoretically provide a service for all consumers in the market. However, when consumers are asked to come to a web-site to find all or even most of their bills, only to find that one or two at most are available to them, they may not return. This makes consumer penetration a very long-term affair and assumes that the consumer aggregator finds it possible and even economic to approach all merchants in the market, however small and/or local they may be. In addition to this problem, although there are several consumer aggregator companies, they offer a slightly different range of features and in many cases may not even offer a full or detailed presentment option. This may act to simply confuse the consumer who may not then be prepared to use any of these sites, especially without their merchant encouraging them to use this as the primary channel.

4. Merchant Aggregators
Like consumer aggregators, merchant aggregators are also typically specialist online companies, but they have a different business model. The goal is to provide a service to one particular merchant at a time, and then work with that merchant to encourage consumers to view and pay their bill electronically (and particularly switch away from cash and cheques). To date, this service has been mainly aimed at small to medium sized merchants (rather than the “super-billers”). This means that both the penetration and growth rate has been slow so far. However, there is much scope for considerably greater growth and therefore higher market penetration in the future.

From a consumer perspective, the expectation here is limited to being able to see one given merchant’s full bill online and to be able to pay it by multiple methods. However, over time, more merchants are progressively added, meaning that consumers get to see several bills, from several merchants (some of which may be quite small and/or local) at the same site (with a familiar login and password).

The main challenge for merchant aggregators is acquiring merchants in the first place (which requires marketing and sales effort). Although merchant aggregators can do this in particular market verticals to manage these costs, one strong possibility is that consolidators (who already have many merchants already for payment purposes) may find it worthwhile to partner with the merchant aggregators, who get transactional volume in return for making available a full online presentment option.

Conclusion
As our chart on the previous page indicates, the biller-direct model has already proved to be a slow and expensive path for many large merchants and looks to be the worst current position to be in, if they were to try to win the online billing wars. Consolidators often have a large bill payments consumer population but do not have a cross-market platform to get their beyond their own customer base. Consumer aggregators have the potential to offer a multi-merchant solution, across the entire market, but having recruited many of the “super-billers” are finding it expensive to add the smaller merchants that consumers would want to see on their site in order to return again. Finally, merchant aggregators, although small in market penetration to date, probably have the most potential to offer a truly cross-market solution, which benefits all merchant and their consumers.

In the final analysis, it is, of course, extremely difficult to predict who is likely to emerge victorious in such a competitive space, especially where the financial stakes of wining or losing are so high. However, if the merchant aggregators can gain enough momentum, perhaps by partnering with the consolidator banks, they seem to be in the best position to win the online billing war at this particular time-we will watch the next couple few years with interest.

Can Better Billing Practices Improve Merchant Cash-flow, Cost Effectiveness and Customer Satisfaction?

This blog article explores whether more efficient and effective billing practices deliver greater Cash-flow, Cost effectiveness and Customer Satisfaction for the merchant and more Convenience, Clarity/Certainty and Choice for the consumer-the 6 C’s

Billing is never the most exciting of subjects for business owners or managers, coming as it does as the last and perhaps most administrative or clerical step in the sales to delivery cycle. However, being a last step should not relegate it to being the least important and there is actually plenty of evidence to suggest that efficient billing practices may be one of the most critical. In this article we will therefore briefly explore why better billing practices can have a significant impact on cash-flow, cost-effectiveness and customer satisfaction for the merchant (as well as several equally beneficial, and linked, outcomes for their customers).

Before we look at each of these 3 merchant benefits in turn, let’s define what we mean by “efficient billing practices”. Presenting a bill or invoice can clearly be done in person (albeit rarely), in the physical mail (with a stamp), via an email (typically with a PDF attachment) or by digital means (via an Internet web site). All four of these options can be relatively “efficient” if they reach the right person quickly and facilitate the earliest possible settlement. However, experience (and much research) tells us that these practices are likely to be progressively more effective in the order in which they are listed. In other words, a full digital presentment of the bill is likely to be a much better option that delivering a bill by email, which in turn is better than doing so by physical mail etc. In this article we will therefore assume that a merchant will have, or aspire to have, the most efficient and effective approach –a full digital e-bill and it will be our contention that getting this bill delivered allows all the benefits we will elaborate upon subsequently to follow. The diagram below illustrates this rather more visually.

© PaySwyft, 2011. All Rights Reserved





Greater Cash-flow
The vast majority of organisations that supply a product or render a service to another organisation, or an end consumer, usually do so on credit terms (a lucky few get paid ahead of time of course). To operate somewhat like a lending bank, an organisation must therefore use shareholder funds, cash in its bank account, supplier credit (if they have any) or other money that is borrowed in some way (with interest being payable). These credit terms, or what is sometimes easier to visualise as the time taken to receive payment from customers, can have a huge impact on the working capital needed by a business and thereby have a critical affect on cash-flow. From the point of the delivery, spending days preparing and sending an invoice along with offering normal credit terms for a given industry (say 30 day terms on average), might mean that a particular enterprise may have an average days outstanding in practice of 40-45 days to get paid. Even for a relatively small business turning over say £500,000 a year this would mean working capital of £30,000 needs to be maintained just to stay in business (or in this case 6% of turnover).

Given the above, if a merchant takes its billing practices seriously, it should present an invoice to the customer in the fastest way possible (ideally digitally, the day after delivery-or even the same day perhaps). In addition, with a full digital bill, an opportunity can be offered to check that the bill has all the information that the customer needs to see and in as much detail and as they need to see it. This creates clarity and certainty that they are paying appropriately for what they have received. On a digitally presented bill, “clickable” payment options can allow the customer to render payment immediately (at the same web site and in the same session) or perhaps schedule a payment there and then (especially if there are multiple payment choices available, which we will look at later). All of this combines to ensure that invoice days outstanding are reduced, in some cases by up to 30-40%. This clearly has a very positive impact on cash-flow and allows working capital to be reduced or freed up for other uses (in the above small business example it could lead to 2-3% of total revenue in savings).

Greater Cost Effectiveness
It is estimated that physical bills (paper-base ones) still account for around 80% of the total volume of bills in all major economies, where there is good data to measure it such as the UK, Australia, Canada, France, Holland, Germany, New Zealand, Singapore, Sweden, and the US (amongst others).

The direct costs of preparing an invoice and sending it in the mail alone are relatively high, especially in an age when we can send almost any document electronically. However, they are even higher when you factor in the indirect costs associated with the potential for keying errors, mis-delivery and loss and the extra time often needed for accounting and reconciliation (to name but a few problems). The email based bill (now accounting for around 15% of the total volume of bills according to most research) removes some of the direct costs above, but almost none of the indirect costs of keying errors and mis-delivery, and extra time needed for accounting and reconciliation. The full digital bill is the only option therefore which has the scope to make a large dent in both direct and indirect costs.

With a well-designed system, a fully digital billing approach allows the customer to see the full bill immediately it is delivered (24/7 and 365 days a year) to analyse it versus other bills from the same merchant potentially and to immediately effect payment (or plan for it to occur on the system). This therefore affords much greater customer convenience (especially when they can use the system for their own personal bill storage and not have to wait for a merchant call-centre to be open to take a payment, for instance). However, the major benefits to the merchant are in having a full electronic record of each transaction (individually or in aggregate), with as much detail as they wish to see. And by maintaining the whole billing process in electronic form, all the data can flow in digital form in all directions, including reconciliation in the accounting system-thereby saving many labour hours and costs.

Greater Customer Satisfaction
When customers are asked about their overall experiences of organisational billing (in general) they will tend to mention three factors more than any other.

The first is that it should offer “clarity and certainty”. By this they typically mean that it should be a clear and easy to follow invoice, be accurate, be securely delivered to them and reflect what they have purchased in a certain way.

Secondly, they will typically say that a bill should be “conveniently” presented. Mailing it may meet this need (physically or by email) but digitally allows it to be viewed at any time day and night and, if it is user-friendly enough, can allow for further detail to be scrutinised, when desired.

Thirdly, and perhaps most importantly, customers will nominate the need for “choice” to be available to them. On the presentment side this may be whether to pay the bill now or later or to set up a scheduled or recurrent payment (with associated electronic alerts and reminders to an email account of mobile phone, as needed). On the payment side, this may be to have lots of immediate and widespread payment types or options to be used on both the debit and credit side if possible. In a well-designed digital billing web site, all of this can be available with an even greater range of choices being available in terms of individual customer preferences, in many cases.

Summary
In conclusion then it should by now be clear that the apparently basic and administrative item of a simple bill to a customer can be presented in a way that can have a significant bearing on Cash-flow, Cost Control and Customer Satisfaction. A well-designed and fully electronic or digital billing process will typically give the best results and all organisations should therefore consider moving to such a system as quickly as possible, especially if they can add it as an additional channel to existing practices (minimising disruption) and on a pay-as-you-go basis (as offered by systems such as PaySwyft for example).

What is the difference between “push” versus “pull” on-line billing?

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).