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.

Using a Range of more “Active” Incentives to adopt e-billing and payment

With a planned and consistent information-led approach which stresses the many benefits of the transition, as much as 15% of a customer base may adopt your new electronic billing and payment system. This information-led approach is like to use a range of gentle encouragement approaches such as:

1. Letters explaining the new system
2. Short notices about particular benefits
3. FAQ’s on a merchant website explaining the new system
4. Pamphlets/Leaflets/Brochures on the new system
5. White papers (on benefits such as being more “green”)
6. Trials (try using the system but keeping getting paper bills)
7. Offers such as planting a tree (for every 10 customers who switch to e-billing)

However, to get the majority of customers to alter old habits, greater incentives are needed and this will depend on each merchant deciding how much extra pressure to change to apply. This falls into two categories-what we call “active encouragement” and “aggressive encouragement”. Let’s look at each of these in turn.

Active encouragement

Active encouragement uses a range of methods to incent customers to switch but all of these fall short of forcing them to change or imposing new costs on them. Examples here include:

1. Offering donations to charity (for each customer/every 5 customers who switch)
2. Using email campaigns to use e-billing
3. Engaging in planned text messaging campaigns to explain the benefits
4. Educating customers over the phone (via a call-center) on a push basis
5. Running advertisements (print, radio and even cable)
6. Running sweepstakes or other competitions around the new e-billing system
7. Using on-hold messaging to encourage adoption

If gentle encouragement achieves the first 15% to adopt e-billing, the above may add another 25% over a 3-6 month period (with consistent effort).

 

Aggressive encouragement

Give that the first two encouragement approaches described above may convert 40% of the customer base to the new billing system on a combined basis, the last 60% may need to be pushed even harder and this is what we call “aggressive encouragement”. Examples of this might be:

1. Running a loyalty points scheme for prizes (in-house or third-party) for switching customers
2. Offering coupons or discounts for products or services (in-house or external) when switching
3. Offering third-party gift certificates for adoption
4. Forcing customers to opt-out of electronic billing (simply by turning off paper bills for example)
5. Offering discounts on bills viewed and paid electronically  (e.g.1%, 2% or even more off)
6. Charging customers if they want a printed invoice
7. Charging customers a surcharge to call in make to a call center

These more aggressive encouragement approaches need to be carefully discussed before implementation and will also depend on the new system being offered. In the case of using a service such as BillSwyft for example, customers can still print invoices and generate PDF’s, thereby making the switch to no paper rather easier to bear.

Moving Customers from the Paper-based World of Bills and Checks into the Digital age?

To encourage customer to adopt an online billing solution of any kind takes careful planning and creativity and there are several “angles” a biller can take in the general promotion of the benefits of the change to e-billing. A few of these are:

1.          The Informational Angle – simply communicating that the new system is available and is easy and quick to use and should be tried –the more you can get the pioneer and early adopter types to make the switch the better-some of these may even provide testimonials to be published on a web site to the rest of the customer base.

2.          The Green Angle – The fact that the new bill presentment and payment system can save paper (and even save water, electricity and fuel) is a powerful reason for many customers to “do their bit” and make own small contribution to the sustainability of the planet.

3.          The Benefits Angle – In the early stages, customers will not be interested long communications about features of a new system (and may even resist any proposed change). However, by focusing on the specific benefits of the new system (such as speed and convenience, or the capacity to save them time and money in an increasingly busy world) this is often more than enough to get them thinking about making the change.

4.          The Rewards Angle – Merchants can offer specific rewards and incentives (points, gifts and prizes etc.) to customers to get them to switch to an electronic billing and payment solution.   

In some cases, a merchant will want to adopt just one of these angles to get customers to start thinking about using an online bill view and payment solution, but it may also be useful to adopt more than one angle or even switch from one to another progressively over time and therefore use all four of the above options. Of course, for the bulk of customers you may need to use the rewards angle (and actively or even aggressively) to get them to take action.

Educating Customers to Adopt an Online billing System

Whenever a merchant introduces a new online billing system, however basic it may be, it is extremely important to educate customers in how to use it. Failure to do this will mean slow take up or even refusal by many ever to use the system.  

 

In the initial stages a merchant should ideally start to educate customers about the new electronic payment channel they have to offer and its specific features and benefits (which help customers to feel more comfortable to try it out) in general terms. The best way to therefore inform customers of a change such as this is to use every available communication channel and to do so frequently. For example, it may be a good idea to think about using some or even all of the following possible channels:

•      Evolving several leaflet(s)/pamphlet(s)/brochure(s)/booklet(s) on what the new electronic payment channel is and how to use it

 

•      Writing a letter to all customers about the new channel and how it is best used

•      Sending one or a series of informational emails about the new service and its various features

•      Designing your on-hold messaging to include information on your new payment service

•      Putting special new payment channel/system FAQs on the main web site

•      Putting a small advert and even brief explanatory information on the physical bill that is sent out to all customers

•      Putting a Quick Response or QR code on all printed bills to allow customers to go straight to your new electronic presentment and payment channel (even from a mobile device).

Another important part of the ongoing education process is to ensure that internal support staff are well-briefed about the new online bill presentment and payment system and can help customers with their questions and early attempts to use the system. This is particularly important when customers raise billing queries or when they wish to make payments over the phone (and can be shown immediately what to do to make the same payment online each month quickly and easily, and even set it up as a recurrent payment if the individual wishes).

 

Customer education is often a forgotten part of introducing a new online billing system but with a little planning and effort it can make take-up considerably quicker and less painful for all concerned.

Taking the First Steps to Getting Customers to Use a New Online Billing Solution

Once a payment strategy has been developed by a merchant and the costs as a proportion of sales calculated carefully the move to a more electronic or digital system for presenting invoices and collecting payments can be planned and executed. 

But merely introducing a new web-based bill presentment and payment service (in any fashion) does not mean that customers will necessarily use it and we therefore need to plan to create reasonable levels of early adoption and conversion to the new online solution over time (so that it eventually becomes the dominant way to view and pay invoices and allow a merchant to realize the full benefits of this). In this booklet we will therefore describe some ways in which this can be done.

Initially Informing All Customers
Once an online billing and payment system is available, the very first step that a merchant needs to take is to inform the customer base that this new “channel” is available to use. Many merchants avoid doing this and expect their customers to almost “stumble across” the option or in some cases, inform customers only once at the outset and then fail to remind customers about the option again in any way. This may be fine for many of the “pioneers” and “early adopters” in the customer base but others will need greater “pushing” and more than one time, of course.

Segmenting the Customer Base

Although the same initial general message about the new online billing and payment system can be sent to all customers (and pretty much in the same language) some later messages may need to be tailored to particular parts of the customer base. For this reason, another important step in getting customers to use the new service at the earliest stages is to analyze and then segment customers so that specific messages to them may then be crafted.

This segmentation may occur in several ways but some examples are indicated in the table below with comments on what could then be crafted as a result, shown on the right hand side:

Segmentation	Specific communication messages
By age (if the data is available)	Although it is always something of a generalization, younger people are usually quicker to adopt internet technology and may like access to a billing and payment system via not only a computer but using tablets and mobile phones. And older customers may appreciate that a service support person will help them to walk through how to view their bill and make an online payment once, twice or even three times, if needed.
By the average length of time it takes the customer to pay	A customer who pays a bill quickly may be attracted to new system features such as bill scheduling or recurrent payment set up (set and forget). Alternatively, a customer who pays slowly or even late may appreciate that they can set up calendar alerts to make payments or even set up their own email alerts as wanted.
By the way they choose to pay their bill (by check, cash, credit card, debit card or ACH, if available)	Some customers like to pay by check, some by cash, some via ACH or direct deposit and some by card. Depending on the electronic solution, a merchant may be able to offer new payment methods (credit cards or ACH for example). The new payment methods are likely to help accelerate cash flow or even bring new customers to the table, in some cases.

 

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.

Implementing an Online Billing Solution

As banks and the rest of the financial services industry continues to evolve online systems and more and more individuals are comfortable using the web, as well as in using their smart phones and tablets to make a payment, all businesses have a tremendous opportunity to speed up their receivables process while lowering costs and improving efficiencies. This is best achieved by making as much of the electronic or digital technology that is readily available to us as possible (although we will need to determine exactly what this means of course).

There is no one-size-fit-all online billing system for every organization, as there will be many individual factors to be taken into account in every case. However, there are some common issues that need to be considered and it is these that we will look at in his brief article. In other words, having assembled a payments strategy and calculated the true cost of billing and collections, the next key question is therefore “what is the best way to go about implementing a more digitized approach to billing and payment for our customers?”

What are the Options?

There are several choices available to a merchant to start to issue bills electronically and to accept payments via the web. These include:
Migrating to an email and attachment based approach

• Adding a third-party payment system
• Building an online billing and payment solution (writing the software),
• Buying a third-party piece of software for online billing and payment,
• Outsourcing some or all of the billing and payment process to go more online
• Using a cloud-based pay-as-you-go online service (such as BillSwyft for example).

All of the above are viable options and the best is likely to be the last of these in cost-saving terms. However, each organization needs to make its own choice in terms of what it is ready to do.

 

Important Transition Considerations?
Whatever online option is finally selected in terms of how to render change to current billing and payment practices, there are several other issues or considerations for a merchant of any size or type to think about. These include:

Size and Type of the Enterprise

Although almost all organizations issue invoices or bills to some degree, some products or services are supplied only after payment is taken at the point of sale. Most retail businesses are a good example of this. However, where customers are allowed to pay for goods and services after they have been supplied or rendered, an invoice needs to be issued promptly and efficiently and ideally options for payment should be many and easy to use. Having said this some invoice volumes are so small that the work involved to send them and collect payment is easily absorbed in one person’s job role. In these circumstances large internally built or third-party software solutions are unlikely to be economic.

Branding/Marketing Issues

Any business will need to decide how much marketing control they want to have over the look and feel of both the bill and the payment page or pages. In some companies, this may not matter very much and a generic payment site may be fit for purpose. However, if a brand is important or even if a company wants to maintain a very similar look and feel (including use of logos etc.) then an internally built, purchased software solution or full digital service such as BillSwyft is likely to give a merchant the most customization potential. 

Website Monitoring and Availability

A critical component to any company’s desire to adopt a more digital billing and payment approach is ensuring that site availability to customers is high. A couple of typical metrics to include are therefore response time and website availability or uptime. Clearly an internally built system or purchased piece of software will need to be well-built and well-supported to be available as needed. 

Customer Service

Many considerations need to be fleshed out when deciding on what type of customer service is needed for a given merchant’s customers. For example, is the system going to be user-friendly to all people who may be interested in using it? do you need 24/7, 365 days a year availability? Do you require international payments? or can your system quickly find a payment transaction when needed (and can it communicate easily with the customer –via online means, when necessary)? 

PCI-Compliance and other Risk issues

As with accepting credit or debit card payments in person (or via a phone call), any merchant accepting cards as a payment type must ensure that they are in compliance with the Payment Card Industry (PCI) Security Standards Council’s rules. The PCI Security Standards Council offers comprehensive standards and supporting materials to enhance payment card data security. The PCI Data Security Standard includes requirements for security management, policies, procedures, network architecture, software design and other critical protective measures, such as card tokenization and encryption.  All of these factors need time and money to manage properly if building an internal solution but are often already party of any third-party site.

Costs/Fees

One other important issue to think about when accepting payments via the web is costs or fees. Many businesses which operate on low margins could see those margins deteriorate even more as credit or debit card fees (direct and indirect) would add an additional (and perhaps unnecessary) layer of cost. Although fees are payable to process payments with an internally developed or software-based solution, third-party providers can also charge a courtesy or convenience fee. All fees therefore need to be carefully scrutinized ahead of time so that there are no surprises when a monthly transactional statement is sent.