For some time now, almost all businesses have had to work a lot harder to keep sales revenues from falling and stop costs rising too quickly (and therefore making profitability very difficult, if not impossible). Although some companies are clearly doing better than others, at the most simple level, they only have two broad “weapons” available to them to do better. One is to sell more and/or at a higher price. The other is to reduce their cost of selling as much as they can without adversely affecting sales or customer service. Let’s look at both of these “weapons” in a little more detail.
Selling more at a higher price
In a high demand market, or where there is product/service scarcity, this is much easier to do. However, in the current economic climate, customers often want to buy or “do” with less and purchase at lower rather than higher costs. As a result, many companies have tried to create discounts for a higher levels of purchases (trading price for volume) or have offered smaller and more flexible purchase “packages” at a higher cost (trading volume for price) but rarely both. Of course, even these individual approaches do not always work and several organisations try many other tactics to win new business or to keep a customer buying (including free product/service giveaways, discounts, costless trial use periods etc). Even more challenging is that every company is now adopting similar steps and the buying customer often benefits by simply watching and waiting for the best deal.
Reduce the cost of selling
At face value, this is a relatively straightforward approach in which we simply stop spending as much as we can or cut budgets/expenses by a fixed amount perhaps. However, all businesses have fixed costs and variable costs. Fixed costs take longer to change (like paying rent in a contract that might run for 2 to 3 years for instance). We therefore often have to wait for the right opportunity to change things in the fixed cost realm. Variable costs can be changed quickly but often mean removing or reducing those very costs which are being invested to generate sales. An obvious example here would be marketing or promotional expenses which are clearly spent to stimulate future purchases. When cutting costs, many companies consequently restrict their efforts to finding “unnecessary expense” or “cost wastage”. This may have worked when there were a few qualifying expenses around to find, but after 2-3 years of economic “squeezing”, there’s often little left to cut.
Technological Innovation comes to the rescue
So, if revenue raising and cost cutting are difficult, what else can companies do? One often overlooked area is to use technology or innovation to render the improvements you are looking for (and this does not have to mean a large-scale investment on the IT side either).
In recent years, technological innovation, as it relates to organisations both small and large, has moved extremely rapidly and has provided whole new ways to do business both more efficiently and effectively. The use of the Internet is an excellent example of this change with even the smallest enterprise now being afforded the opportunity to sell to a worldwide customer base if they so wish via a well-designed web site. And even individual customers are keeping up with the Internet revolution it seems. In 2011 it is estimated that a little under 24 million people in the UK will regularly use the Internet for business transactions. And for a high proportion of these, it is their preferred way of transacting with organisations they buy from.
With the above in mind, there is one area that every enterprise can quickly change to achieve positive benefits on both the revenue raising and cost reduction efforts side of the equation. This is using the Internet to present the organisations’ bills or invoices and to allow them to be paid by customers electronically.
In the past, the change to online billing and payment would have meant quite a large investment in both hardware and software and having to tie up valuable employee resources for months potentially (IT and other). However, if the right solution is selected this no longer needs to be the case. Full service Digital billing providers (such as PaySwyft) have already invested in the technology and are continuing to do so continually. What this means is that this technology is therefore now offered on a “pay-as-you-go” basis to organisations, which can thereby gain the benefits immediately and only pay as a small proportion of transactional income, as the online processes are used. Although this sounds like an on-cost (even if it is “pay-as-you-go”) this is not the case. By getting customers to review invoices online and paying them by electronic means, a company saves lots of individual costs, including issuing invoices (paper, ink, envelopes, stamps etc) and collecting payment (phone call handling, credit control, reminders, statements, reconciliation efforts etc). In addition, because the whole process is much faster for both the merchant and the customer, payments are often made much more quickly, thereby accelerating much needed cash flow. It is not unusual in these circumstances to see savings of 3-5% of costs saved by adopting online bill presentment and payment as well as 0.5-1.5% in revenue side benefits. Clearly this makes a big difference to the bottom line and is well worth investigating as a strategic performance improvement exercise.
Tuesday, 22 February 2011
Friday, 11 February 2011
Getting paid by the customer-the first not the last consideration
Any entrepreneur looking to start and build a new business would typically have a long list of priorities to consider. This might include what legal structure to adopt, how much operational money to raise (and from where), the specific market upon which to focus, how to advertise the business to customers and how to render efficient and effective service, etc. How to get paid, however, rarely makes it to the list, and even if it does, as a very low priority. Even large-scale and mature businesses commonly fall into this trap, leaving the whole subject of getting paid by the customer as an afterthought at best. So, why is this the case and why does it matter?
First and foremost, whether it is a start-up or mature business, cash-flow is the lifeblood of any organisation. Initial cash-flow may come from shareholders or from borrowings, but pretty quickly, almost all the cash that most companies get comes from its customers. Ideally then, customers who are satisfied with the products or services that are provided are happy to pay the bills that are sent to them. However, they will only remain satisfied if the process for sending them appropriate bills and for settling these bills has been well thought-through.
To illustrate how different this can be from one company to another, let’s look at two example organisations of similar size (each issuing about 3000 bills a month on 30 day payment terms) to see the impact of a well-designed and executed billing and payment system, versus one which is poorly designed and executed.
In company A, management have decided to issue bills/invoices to customers electronically as much as possible. They therefore ask for email address contact details when they acquire new customers and even request a mobile phone number so as to use both email and text messaging when appropriate. Furthermore, they automatically upload their bills into a full digital billing and payment site where bills can be seen and settled 24/7 (such as www.payswyft.com). This allows all bills to be quickly uploaded and viewed almost instantaneously as they are issued. The bill is displayed online in icon format (with full bill detail if required) and can be settled on the same web site immediately. Settlement options include all major credit and debit cards, calendarised dynamic debit payments and even cash settlement choices at the site. In summary the customer gets his or her bill immediately as it is issued (within seconds), can pay it within a few clicks online and gets a record of the transaction stored in the system forever. Because there is really no need to print anything to paper (unless people want to), this is an entirely “green” system for all parties.
In company B, management have decided to stick with a traditional billing system and, as such, send physical bills to customer home addresses. It takes 2-3 days to prepare the “bill-run” typically and takes up to 2 -3 days for the bill to reach the customer (with a second class stamp). Once they have received the bill customers can pay by cheque and direct debit, but only by credit or debit card if they call the company’s call-centre between the hours of 9am and 5.30pm each Monday to Friday. Some bills are lost by customers (and need to be found and resent) and in all cases a follow up chase bill is sent out again after 21 days to encourage settlement within the 30 day terms. Customers call in to get copy bills frequently and also regularly call to ask questions about past bills.
In company A, 90% of customers are not only happy to pay online but 95% of these do so on terms or better. Of the other 10%, cheques and cash payments are rendered, but the system of email and SMS alerts keeps days outstanding to within 3 days late over terms on average. The business therefore needs no special late payment reserve and has no call-centre staff to pay. It also has very few people involved in account reconciliation as most of the electronic payments are automatically matched and reconciled online. Customers are generally happy with the flexibility and choice offered in the payment options, and often comment on it as “a big plus” in the annual customer survey. The bottom line-the cost to issue a single bill and get paid costs about £5 total in company A. This is therefore £15,000 per month or £180,000 a year.
In company B, 30% of customers pay by direct debit on terms. The rest either send cheques or phone in to the call-centre to make a card payment. While 60% of these are paid on terms, 40% are paid late and days outstanding run at 10 days over terms on average. The business therefore runs a reasonably large cash reserve (as an overdraft from the bank), has quite a few staff in customer service (to handle the call volume) and in accounts (to deal with reconciliation issues). Complaints about payment problems are frequent and billing is generally a big minus on the annual customer survey. The bottom line-the cost to issue a single bill and get paid costs about £10 total in company B. This is therefore £30,000 per month or £360,000 a year.
It may seem that these two companies of similar size are deliberately and conveniently described as being poles apart in their approach (with naturally large scale differences in their costs). However, these are real example of two companies that put getting paid first versus last. The key (and hopefully obvious) question is which one would you rather be in your organisation?
First and foremost, whether it is a start-up or mature business, cash-flow is the lifeblood of any organisation. Initial cash-flow may come from shareholders or from borrowings, but pretty quickly, almost all the cash that most companies get comes from its customers. Ideally then, customers who are satisfied with the products or services that are provided are happy to pay the bills that are sent to them. However, they will only remain satisfied if the process for sending them appropriate bills and for settling these bills has been well thought-through.
To illustrate how different this can be from one company to another, let’s look at two example organisations of similar size (each issuing about 3000 bills a month on 30 day payment terms) to see the impact of a well-designed and executed billing and payment system, versus one which is poorly designed and executed.
In company A, management have decided to issue bills/invoices to customers electronically as much as possible. They therefore ask for email address contact details when they acquire new customers and even request a mobile phone number so as to use both email and text messaging when appropriate. Furthermore, they automatically upload their bills into a full digital billing and payment site where bills can be seen and settled 24/7 (such as www.payswyft.com). This allows all bills to be quickly uploaded and viewed almost instantaneously as they are issued. The bill is displayed online in icon format (with full bill detail if required) and can be settled on the same web site immediately. Settlement options include all major credit and debit cards, calendarised dynamic debit payments and even cash settlement choices at the site. In summary the customer gets his or her bill immediately as it is issued (within seconds), can pay it within a few clicks online and gets a record of the transaction stored in the system forever. Because there is really no need to print anything to paper (unless people want to), this is an entirely “green” system for all parties.
In company B, management have decided to stick with a traditional billing system and, as such, send physical bills to customer home addresses. It takes 2-3 days to prepare the “bill-run” typically and takes up to 2 -3 days for the bill to reach the customer (with a second class stamp). Once they have received the bill customers can pay by cheque and direct debit, but only by credit or debit card if they call the company’s call-centre between the hours of 9am and 5.30pm each Monday to Friday. Some bills are lost by customers (and need to be found and resent) and in all cases a follow up chase bill is sent out again after 21 days to encourage settlement within the 30 day terms. Customers call in to get copy bills frequently and also regularly call to ask questions about past bills.
In company A, 90% of customers are not only happy to pay online but 95% of these do so on terms or better. Of the other 10%, cheques and cash payments are rendered, but the system of email and SMS alerts keeps days outstanding to within 3 days late over terms on average. The business therefore needs no special late payment reserve and has no call-centre staff to pay. It also has very few people involved in account reconciliation as most of the electronic payments are automatically matched and reconciled online. Customers are generally happy with the flexibility and choice offered in the payment options, and often comment on it as “a big plus” in the annual customer survey. The bottom line-the cost to issue a single bill and get paid costs about £5 total in company A. This is therefore £15,000 per month or £180,000 a year.
In company B, 30% of customers pay by direct debit on terms. The rest either send cheques or phone in to the call-centre to make a card payment. While 60% of these are paid on terms, 40% are paid late and days outstanding run at 10 days over terms on average. The business therefore runs a reasonably large cash reserve (as an overdraft from the bank), has quite a few staff in customer service (to handle the call volume) and in accounts (to deal with reconciliation issues). Complaints about payment problems are frequent and billing is generally a big minus on the annual customer survey. The bottom line-the cost to issue a single bill and get paid costs about £10 total in company B. This is therefore £30,000 per month or £360,000 a year.
It may seem that these two companies of similar size are deliberately and conveniently described as being poles apart in their approach (with naturally large scale differences in their costs). However, these are real example of two companies that put getting paid first versus last. The key (and hopefully obvious) question is which one would you rather be in your organisation?
Friday, 4 February 2011
Does offering lots of ways to pay bills on-line make a difference?
Despite the rapid rise of the Internet in recent years as a way to both issue a bill/invoice to customers and get it paid on-line, many organisations are not giving their customers much convenience or choice in terms of ways to pay (and not always on-line ones).
In terms of limited convenience, some businesses will send out a bill via email but then expect customers to call in on the phone to make a payment (and then have to staff up to take that call). Even worse, they may encourage customers to send a cheque (and then have to staff up to receive the paper, reconcile it and deposit the cheques at the bank). Having used an on-line channel in the first instance, this simply serves to take customers back to very traditional methods to pay (and also limits the options by which payment of a bill can be made).
And when it comes to choice, consumers like to have many options as possible when paying bills. Hence, writing a cheque might be a valid option but involves writing it out accurately, stamping and then posting it and waiting for the money to be deducted from a bank account. Paying bills at the post office may also be a viable choice but is far less attractive if the customer knows that they may have to queue for quite a while to do it. By making other payment choices available, many customers will therefore elect to pay online by a debit or credit card or by using Internet banking and save themselves time and hassle in doing so.
In terms of available technology, as we are now able to issue a bill electronically (and save the manual time and effort of typing up invoices, stuffing envelopes, stamping them and sending them out) then we should ideally look to give the customer simple ways to stay online to make a payment-this can deliver both greater convenience and choice. So how can this best be done? There are essentially 3 options:
First, an organisation can seek a merchant account with their bank or building society and, once approved, use their facilities to offer several online payment options. Banks/Building societies like merchants to use internet banking, so these days will offer relatively easy ways to make BACS transfers and direct debits for example. They will also issue credit cards for merchants to use and a PDQ machine for some to accept payments (as long as the merchant can staff the machine so that credit and debit cards can be processed). Although this solution undoubtedly diversifies the payments options to customers, none of this is necessarily with some merchant cost of course. Most banks will expect quite a lot of up front security, minimum monthly fees and what might be quite high per-transaction rates unless they get a lot of customer business from a given merchant. They also will not usually offer much more than some very basic payment records.
Secondly, and the first choice of many online websites with a shopping cart for example, is for a merchant to sign up with a Payment Service Provider or PSP. A PSP (such as Worldpay, Global Collect or PayPal for instance) will usually make a wide variety of payment options available via debit or credit and may have the added benefit of allowing customers the opportunity to pay in several different currencies. This can therefore be an attractive option for those merchants who just want to effectively “outsource” the online payment process to a third party. Once again however, although PSPs offer diversified payments options to customers, it can be expensive (with transaction fees of 4% or more in many cases). In addition, a PSP will often also have minimum fees (either monthly or even per transaction) and not offer an on-line billing functionality or capability.
As a third choice, an organisation can work with an online billing and payment aggregation company (such as Payswyft). The main benefit of this option is that the customers of an individual merchant can see an electronic or digital version of the bill at a single web site and then click on the bill to then select from a range of ways to pay or settle it. On a well-designed site these ways will include not only debit side and credit card options but also the ability to pay by dynamic debit and even cash. Furthermore, because the whole site is dedicated to bill presentment and payment, there will be a number of additional services that are useful to the merchant. This is likely to include customisable alerts and reminders (for both merchants and customers), searchable and date-range-able analytics and reports on all transactions and effective bill-matching capability. In this option there are no minimum fees and merchants will make for each transaction according to what the customer chooses to do.
Whatever a merchant elects to do, convenience and choice will greatly improve the customer experience when paying an pnline bill and is likely to decrease internal costs of handling by more traditional payment methods, as well as accelerate cash flow. However, merchants should be careful about how they go about increasing convenience and payment choice as there can be significant up-front costs to be considered-which with care and the right options, can be kept to an absolute minimum.
In terms of limited convenience, some businesses will send out a bill via email but then expect customers to call in on the phone to make a payment (and then have to staff up to take that call). Even worse, they may encourage customers to send a cheque (and then have to staff up to receive the paper, reconcile it and deposit the cheques at the bank). Having used an on-line channel in the first instance, this simply serves to take customers back to very traditional methods to pay (and also limits the options by which payment of a bill can be made).
And when it comes to choice, consumers like to have many options as possible when paying bills. Hence, writing a cheque might be a valid option but involves writing it out accurately, stamping and then posting it and waiting for the money to be deducted from a bank account. Paying bills at the post office may also be a viable choice but is far less attractive if the customer knows that they may have to queue for quite a while to do it. By making other payment choices available, many customers will therefore elect to pay online by a debit or credit card or by using Internet banking and save themselves time and hassle in doing so.
In terms of available technology, as we are now able to issue a bill electronically (and save the manual time and effort of typing up invoices, stuffing envelopes, stamping them and sending them out) then we should ideally look to give the customer simple ways to stay online to make a payment-this can deliver both greater convenience and choice. So how can this best be done? There are essentially 3 options:
First, an organisation can seek a merchant account with their bank or building society and, once approved, use their facilities to offer several online payment options. Banks/Building societies like merchants to use internet banking, so these days will offer relatively easy ways to make BACS transfers and direct debits for example. They will also issue credit cards for merchants to use and a PDQ machine for some to accept payments (as long as the merchant can staff the machine so that credit and debit cards can be processed). Although this solution undoubtedly diversifies the payments options to customers, none of this is necessarily with some merchant cost of course. Most banks will expect quite a lot of up front security, minimum monthly fees and what might be quite high per-transaction rates unless they get a lot of customer business from a given merchant. They also will not usually offer much more than some very basic payment records.
Secondly, and the first choice of many online websites with a shopping cart for example, is for a merchant to sign up with a Payment Service Provider or PSP. A PSP (such as Worldpay, Global Collect or PayPal for instance) will usually make a wide variety of payment options available via debit or credit and may have the added benefit of allowing customers the opportunity to pay in several different currencies. This can therefore be an attractive option for those merchants who just want to effectively “outsource” the online payment process to a third party. Once again however, although PSPs offer diversified payments options to customers, it can be expensive (with transaction fees of 4% or more in many cases). In addition, a PSP will often also have minimum fees (either monthly or even per transaction) and not offer an on-line billing functionality or capability.
As a third choice, an organisation can work with an online billing and payment aggregation company (such as Payswyft). The main benefit of this option is that the customers of an individual merchant can see an electronic or digital version of the bill at a single web site and then click on the bill to then select from a range of ways to pay or settle it. On a well-designed site these ways will include not only debit side and credit card options but also the ability to pay by dynamic debit and even cash. Furthermore, because the whole site is dedicated to bill presentment and payment, there will be a number of additional services that are useful to the merchant. This is likely to include customisable alerts and reminders (for both merchants and customers), searchable and date-range-able analytics and reports on all transactions and effective bill-matching capability. In this option there are no minimum fees and merchants will make for each transaction according to what the customer chooses to do.
Whatever a merchant elects to do, convenience and choice will greatly improve the customer experience when paying an pnline bill and is likely to decrease internal costs of handling by more traditional payment methods, as well as accelerate cash flow. However, merchants should be careful about how they go about increasing convenience and payment choice as there can be significant up-front costs to be considered-which with care and the right options, can be kept to an absolute minimum.
Saturday, 29 January 2011
A Tale of two invoices
In quite long thread on the social networking site “linked in” recently, one individual suggested that sending out invoices was a necessary and rather mundane part of doing business and, as long as it was done efficiently, how it was approached (on or off line) made very little difference to the bottom line-perhaps only a few pounds for a small business. In this posting, let’s test that assumption by looking at what time and cost is involved in sending out invoices physically (which for our purposes here includes emailing them as attachments which are then printed) and sending them out electronically with a full digital bill/invoice presentment solution like PaySwyft.
Traditional billing
Most businesses bill on a regular basis, such as the end every day, every week or every month. In all cases however the product or service rendered has to be known along with its cost and an invoice generated to the relevant customer. Even if an accounting system can produce this whole list readily (which is not always the case of course) each invoice needs to be printed (or rendered as a PDF if it is to be emailed) and then sent out with either a correctly addressed envelope (and stamp) or by email. These invoices are then received and opened by the respective customers at various stages-some immediately and some not being opened for several days perhaps and then put into the payables processing queue to be paid either on terms or at some point afterwards.
In traditional billing, customers tended to be treated similarly in terms of offering only one, two or three payment options (such as cheque, direct debit or occasionally a credit card) but whichever one they choose, the customer will need to work quite hard to remit the payment (taking both time, effort and money). Cheques for example need to be written, signed and posted (in an envelope with stamp). Credit card payments (if they are accepted) require the customer to call the client and quote the card details to an accounts receivable person who then needs to reconcile or match the payment to the invoice as quickly as possible.
The bottom line is that traditional billing is an old-fashioned and relatively inefficient process and has high costs for both the issuing organisation and the receiving customer. The research firm Billentis suggests that the average internal cost of billing is somewhere between £5 and £15 (depending upon size of firm and overall process efficiency). About two thirds of this cost is in relatively hidden business expenses such as the staff required to collect money, handle bill calls/deal with queries and carry out bill reconciliation/matching. Hence, anywhere from £3 to £10 of this cost is potentially completely avoidable.
Digital Billing
In sophisticated and well-designed on-line web sites like www.payswyft.com every organisation can now easily upload all of their invoices (daily, weekly or monthly) to the PaySwyft web site at the same time as they are posting out or emailing their invoices. Hence this adds no time or internal effort and only involves a small cost per bill (usually around £0.40 pence). This is technically an on cost to a business until a physical invoice is no longer sent. However, even if this is not the case, a digital invoice in the PaySwyft system brings a number of benefits.
Firstly, all customers now have the added option of being immediately able to see their bill or invoice (in summary or in detail) at the PaySwyft site just by entering the unique Merchant number and invoice number. If they wish they can then pay it instantly, or (if they want to have a number of tracking, alert and reporting benefits) they can register and pay it. In addition, customers can pay their bill by all the options that the PaySwyft site offers including all debit and credit cards, Dynamic debit and even cash. There are actually 10 different ways to pay offered, and this number will only grow over time, all helping the merchant to get their money by the means by which the customer can best pay.
As yet another benefit of digital billing in a system like the one at payswyft.com, the on-line site is available to customers 24 hours a day, 7 days a week and 365 days of the year. This means that payments can be remitted whenever a customer wishes to do so, not just when the organisation is open to accept cheques or field phone calls (perhaps only 9-5pm Monday to Friday).
Even if only 10% of customers pay via this on-line channel, this is 10% of invoices that are paid and easily reconciled (requiring no further work or call handling). However, in practice, customers increasingly like making payments on-line, particularly when the channel is safe and secure. Some organisations have therefore converted many more and, in some instances, all of their customers to this online invoicing and payment method.
In time and cost terms, research suggests that those customers paying a digital bill are quicker to pay (accelerating cash flow), are less likely to call the issuing organisation for any reason and are making a transaction which is readily matched and reconciled (saving expensive accounting or bookkeeping time). All in all this is likely to save an organisation anywhere from £3 to £6 per invoice. Even if you only send out 100 invoices a month this results in savings of £3,600 to £7,200. Its quite clear then that this is a significant difference and may amount to a very large sum for larger organisations.
Traditional billing
Most businesses bill on a regular basis, such as the end every day, every week or every month. In all cases however the product or service rendered has to be known along with its cost and an invoice generated to the relevant customer. Even if an accounting system can produce this whole list readily (which is not always the case of course) each invoice needs to be printed (or rendered as a PDF if it is to be emailed) and then sent out with either a correctly addressed envelope (and stamp) or by email. These invoices are then received and opened by the respective customers at various stages-some immediately and some not being opened for several days perhaps and then put into the payables processing queue to be paid either on terms or at some point afterwards.
In traditional billing, customers tended to be treated similarly in terms of offering only one, two or three payment options (such as cheque, direct debit or occasionally a credit card) but whichever one they choose, the customer will need to work quite hard to remit the payment (taking both time, effort and money). Cheques for example need to be written, signed and posted (in an envelope with stamp). Credit card payments (if they are accepted) require the customer to call the client and quote the card details to an accounts receivable person who then needs to reconcile or match the payment to the invoice as quickly as possible.
The bottom line is that traditional billing is an old-fashioned and relatively inefficient process and has high costs for both the issuing organisation and the receiving customer. The research firm Billentis suggests that the average internal cost of billing is somewhere between £5 and £15 (depending upon size of firm and overall process efficiency). About two thirds of this cost is in relatively hidden business expenses such as the staff required to collect money, handle bill calls/deal with queries and carry out bill reconciliation/matching. Hence, anywhere from £3 to £10 of this cost is potentially completely avoidable.
Digital Billing
In sophisticated and well-designed on-line web sites like www.payswyft.com every organisation can now easily upload all of their invoices (daily, weekly or monthly) to the PaySwyft web site at the same time as they are posting out or emailing their invoices. Hence this adds no time or internal effort and only involves a small cost per bill (usually around £0.40 pence). This is technically an on cost to a business until a physical invoice is no longer sent. However, even if this is not the case, a digital invoice in the PaySwyft system brings a number of benefits.
Firstly, all customers now have the added option of being immediately able to see their bill or invoice (in summary or in detail) at the PaySwyft site just by entering the unique Merchant number and invoice number. If they wish they can then pay it instantly, or (if they want to have a number of tracking, alert and reporting benefits) they can register and pay it. In addition, customers can pay their bill by all the options that the PaySwyft site offers including all debit and credit cards, Dynamic debit and even cash. There are actually 10 different ways to pay offered, and this number will only grow over time, all helping the merchant to get their money by the means by which the customer can best pay.
As yet another benefit of digital billing in a system like the one at payswyft.com, the on-line site is available to customers 24 hours a day, 7 days a week and 365 days of the year. This means that payments can be remitted whenever a customer wishes to do so, not just when the organisation is open to accept cheques or field phone calls (perhaps only 9-5pm Monday to Friday).
Even if only 10% of customers pay via this on-line channel, this is 10% of invoices that are paid and easily reconciled (requiring no further work or call handling). However, in practice, customers increasingly like making payments on-line, particularly when the channel is safe and secure. Some organisations have therefore converted many more and, in some instances, all of their customers to this online invoicing and payment method.
In time and cost terms, research suggests that those customers paying a digital bill are quicker to pay (accelerating cash flow), are less likely to call the issuing organisation for any reason and are making a transaction which is readily matched and reconciled (saving expensive accounting or bookkeeping time). All in all this is likely to save an organisation anywhere from £3 to £6 per invoice. Even if you only send out 100 invoices a month this results in savings of £3,600 to £7,200. Its quite clear then that this is a significant difference and may amount to a very large sum for larger organisations.
Tuesday, 11 January 2011
Billing-just a necessary evil to be tolerated?
Whether you are a small, medium or large business, billing your customers for the products or services you provide is probably one of the last processes that you think about or design (in fact you may not “design” it all!). In this sense, it is often almost an afterthought and an administration “pain” to be borne or necessary evil to be tolerated, as the title of this blog suggests. Once set up, many businesses therefore give the whole situation little more thought, sometimes year after year, and just accept that the endless printing of invoices, stuffing of envelopes, issuing of emails, chasing of outstanding amounts and reconciling of payments (to name only a few of the tasks) just has to be done, without too much grumbling. But the big question here is this –what are we missing in viewing the rather irritating but necessary billing process in this rather negative way?
Over forty years ago, the quality guru Joseph Juran suggested that all businesses should pay most attention to three macro processes-these were:
1. Demand generation (or the creation of demand from consumers for the products or services on offer, usually through sales and marketing efforts).
2. Demand fulfilment (or the supply of the products or services on offer, usually through operational, technical or logistical means).
3. Cash generation (or the receipt and management of sufficient cash to ensure that current business activities are fully funded and that the business can continue to operate effectively in the future).
Juran suggested that most businesses pay enormous improvement time and attention to the first two of these macro processes but very little to the last, at least until a crisis occurs. It seems that not much has changed then today, with very little management time or even external help being available to help streamline this very critical area. So what are the choices that are available to optimise the process of issuing a bill and collecting money as fast as possible from customers?
As we are all aware, the big change in recent years has been the speed and access to the Internet and its ever increasing use as a more convenient tool for businesses and their customers. In the realm of billing and payment the Internet has already made a significant impact on most of us. Many people will have experienced electronic bills being presented by email (with an attachment or a dynamic link to click to a merchant web site such as a mobile phone company) and experienced the speed and convenience of electronic payment through an online bank account or payment service such as PayPal or American Express, for example. Even if we don’t like or not quite trust these services, we can therefore appreciate that this trend towards online services is likely to grow. However, the online experience remains quite limited in terms of total transactions completed and it is still rare to see a fully integrated experience which feels similar to getting a bill in the physical mail and then sending off a cheque to settle it and feel a sense of ticking a task off your list-until now that is.
Web 2.0 technology allows much better use of the Internet than it did as recently as only two to three years ago. This means that physical bills can not only be rendered to look similar online but can also be truly digital. This means that the online bill is “clickable” to manipulate it as a merchant or consumer wishes, whether it is to view it in more detail, check it against past invoices, schedule it for payment, pay it or just store it. And because it is online, there is no need for physical copying or storage in theory (even though it continues to be one of those things that people still do “just to be safe”).
In sophisticated webs sites such as www.PaySwyft.com the on-line experience of a fully digital “one-stop-shop bill presentment and payment site is a huge advantage to both the bill issuer and receiver. Look at the just some of the benefits to each in using the PaySwyft service the table below:
Merchant Advantages/Benefits
• Simple and flexible (and cost effective) Bill presentment
• More payment options for customers
• Saves time, money and hassle on paper handling
• Competitive transaction rates for payments (and transparent rate card)
• Instant receipting
• Ability to take payments 24/7 and 365 days of the year
• Cash flow acceleration
• Detailed payment/reconciliation schedule
• Safe and secure payment systems
• Flexible on-line alert system
• Ability to accept cash payments
• Easy to upload from/download to accounts systems
• Better invoice payment reconciliations
• Free to use on-line marketing portal
• Greener solution when customers start to “turn off” paper bills
Consumer Advantages/Benefits
• Safe and secure to use
• No need to register with PaySwyft (can use instant pay)
• Consumer information kept confidential
• Email or SMS alerts when payments due
• Ability to calendarise payments
• Dynamic debit option for regular payments
• Easier reconciliation
• Purpose built – consumer friendly
• Free on-going on-line bill/payment record storage
• Flexible and easy to use analytical tools
• Green solution
• Free
Summary
Billing may be a necessary evil to many but Internet technology has evolved to the point whereby it can be made much less painful to both the bill issuer and bill receiver and start to give tangible benefits to both. This helps customers to remit their payments more efficiently, effectively and willingly and helps to make the merchants substantially better at generating the money they need to deliver even better future service-the ultimate virtuous cycle!
Over forty years ago, the quality guru Joseph Juran suggested that all businesses should pay most attention to three macro processes-these were:
1. Demand generation (or the creation of demand from consumers for the products or services on offer, usually through sales and marketing efforts).
2. Demand fulfilment (or the supply of the products or services on offer, usually through operational, technical or logistical means).
3. Cash generation (or the receipt and management of sufficient cash to ensure that current business activities are fully funded and that the business can continue to operate effectively in the future).
Juran suggested that most businesses pay enormous improvement time and attention to the first two of these macro processes but very little to the last, at least until a crisis occurs. It seems that not much has changed then today, with very little management time or even external help being available to help streamline this very critical area. So what are the choices that are available to optimise the process of issuing a bill and collecting money as fast as possible from customers?
As we are all aware, the big change in recent years has been the speed and access to the Internet and its ever increasing use as a more convenient tool for businesses and their customers. In the realm of billing and payment the Internet has already made a significant impact on most of us. Many people will have experienced electronic bills being presented by email (with an attachment or a dynamic link to click to a merchant web site such as a mobile phone company) and experienced the speed and convenience of electronic payment through an online bank account or payment service such as PayPal or American Express, for example. Even if we don’t like or not quite trust these services, we can therefore appreciate that this trend towards online services is likely to grow. However, the online experience remains quite limited in terms of total transactions completed and it is still rare to see a fully integrated experience which feels similar to getting a bill in the physical mail and then sending off a cheque to settle it and feel a sense of ticking a task off your list-until now that is.
Web 2.0 technology allows much better use of the Internet than it did as recently as only two to three years ago. This means that physical bills can not only be rendered to look similar online but can also be truly digital. This means that the online bill is “clickable” to manipulate it as a merchant or consumer wishes, whether it is to view it in more detail, check it against past invoices, schedule it for payment, pay it or just store it. And because it is online, there is no need for physical copying or storage in theory (even though it continues to be one of those things that people still do “just to be safe”).
In sophisticated webs sites such as www.PaySwyft.com the on-line experience of a fully digital “one-stop-shop bill presentment and payment site is a huge advantage to both the bill issuer and receiver. Look at the just some of the benefits to each in using the PaySwyft service the table below:
Merchant Advantages/Benefits
• Simple and flexible (and cost effective) Bill presentment
• More payment options for customers
• Saves time, money and hassle on paper handling
• Competitive transaction rates for payments (and transparent rate card)
• Instant receipting
• Ability to take payments 24/7 and 365 days of the year
• Cash flow acceleration
• Detailed payment/reconciliation schedule
• Safe and secure payment systems
• Flexible on-line alert system
• Ability to accept cash payments
• Easy to upload from/download to accounts systems
• Better invoice payment reconciliations
• Free to use on-line marketing portal
• Greener solution when customers start to “turn off” paper bills
Consumer Advantages/Benefits
• Safe and secure to use
• No need to register with PaySwyft (can use instant pay)
• Consumer information kept confidential
• Email or SMS alerts when payments due
• Ability to calendarise payments
• Dynamic debit option for regular payments
• Easier reconciliation
• Purpose built – consumer friendly
• Free on-going on-line bill/payment record storage
• Flexible and easy to use analytical tools
• Green solution
• Free
Summary
Billing may be a necessary evil to many but Internet technology has evolved to the point whereby it can be made much less painful to both the bill issuer and bill receiver and start to give tangible benefits to both. This helps customers to remit their payments more efficiently, effectively and willingly and helps to make the merchants substantially better at generating the money they need to deliver even better future service-the ultimate virtuous cycle!
Friday, 7 January 2011
What are the benefits of e-billing to customers and merchants?
E-billing is something of a “catch all” phrase which can often lead to much confusion for both the potential customer and the merchant who may want to adopt it. So let’s propose what is hopefully a helpful definition:
“E-Billing is the presentment of a bill or invoice by electronic means (usually via the Internet) allowing a customer to immediately choose from a range of alternatives to make payment. This should be facilitated in a user-friendly way and with the minimum of time and effort for all concerned.”
An e-billing process should consequently represent a substantive improvement over paper-based or other “off-line” billing/invoicing methods, and be more effective and efficient to both the customer and to the merchant.
There are three kinds of e-billing:
The first of these is e-billing via a bank web site (tied to a customer account). This is typically very limited in as much as a bank will not electronically present the bill or invoice, and in many cases may only allow customers to pay the large billers (such as utilities). They may also allow only cleared bank funds to settle bills and not credit side options, and offer limited or no bill history/storage options.
The second kind of e-billing is via e-mail (typically as a PDF attachment). This process is dependent on not only having an email address for the bill recipient but requires that the bill is printed and settled in the same way as a posted paper-bill. While this method saves costs in terms of postage and paper, in reality it is little different to the old-fashioned paper-based process that it attempts to replace.
The third kind of e-billing is the digital kind, whereby a bill is presented on a portal web site (such as www.payswyft.com) as a fully clickable document (for both bill detail, and payment). E-bills presented digitally look very much like the ones that are posted or emailed as attachments but are truly “live” or clickable documents that can be analysed, forwarded, and stored (as well as paid) electronically.
If we now return to our definition above, we can consider both the customer (or bill-receiver) experience and the merchant experience to see what each of the three kinds of e-billing offers in terms of efficiency and effectiveness.
The customer or bill-receiver experience
In all three kinds of e-billing the service is typically free to consumers and they avoid having to physically open envelopes and sort each bill individually.
In bank site e-billing, the consumer cannot see his or her bill (which would depend on some very clever technology with every biller –small to large, to allow this to happen). Hence the bank site e-billing option is very much concerned with payment only (and even this may be constrained). Hence, we might score this method for the customer at 3 out of 5 in terms of efficiency and 2 out of 5 in terms of effectiveness.
In the e-mail attachment process, the individual gets to see his or her bill quickly but can rarely do much else with it. This means that he or she may have to print, copy, store and even pay the bill using other systems or even by off-line means such as writing and posting a cheque to settle it. Hence, we might score this method for the customer at 2 out of 5 in terms of efficiency and 1 out of 5 in terms of effectiveness.
In the fully digital e-billing process, the consumer can print a bill only if they wish to, forward it, store it and pay it flexibly on-line (and in the same system and/or on the same web site). In addition bill storage and analysis is much more flexible. This saves both time and money for the consumer. Hence, we might score this method for the customer at 4 out of 5 in terms of efficiency and 5 out of 5 in terms of effectiveness. Clearly this is much better than either of the other options.
The merchant experience
In all three kinds of e-billing, the service is certainly potentially more effective and efficient than paper-based solutions but this is unlikely to be enough for a merchant who wants to invest in this approach.
In the bank site e-billing process the merchant will not be able to give customers an electronic bill (and will therefore have to continue to present it by post or email attachment). In addition, they may pay the bank for their merchant account (with fixed and variable costs) and not necessarily get additionally payment options for customers unless they pay what may be quite high per transaction fees. Hence, we might score this method for the merchant at 3 out of 5 in terms of efficiency and 1 out of 5 in terms of effectiveness.
In the e-mail attachment process, the merchant can save paper and postage costs (but only when consumers are prepared to turn off paper-based bills) and get some efficiency of delivery in terms of speed (as long as they have accurate email addresses of course). However, the reconciliation process is still likely to be unchanged and there may be little change in speed of payment by customers. Hence, we might score this method for the merchant at 2 out of 5 in terms of efficiency and 1 out of 5 in terms of effectiveness.
In the fully digital e-billing process, the merchant gets to upload their bill in pretty much the same format as they would have posted it (and probably save a little money on the cost side here). However, the far greater benefits will typically come from considerably better reconciliation and faster settlement (because of greater consumer-friendliness and more payment options being made available). Hence, we might score this method for the merchant at 4 out of 5 in terms of efficiency and 5 out of 5 in terms of effectiveness.
Summary
E-billing is more efficient and effective than paper-based billing for both the consumer and the merchant. However, not all e-billing solutions are alike and digital billing represents a major won-win for everyone.
“E-Billing is the presentment of a bill or invoice by electronic means (usually via the Internet) allowing a customer to immediately choose from a range of alternatives to make payment. This should be facilitated in a user-friendly way and with the minimum of time and effort for all concerned.”
An e-billing process should consequently represent a substantive improvement over paper-based or other “off-line” billing/invoicing methods, and be more effective and efficient to both the customer and to the merchant.
There are three kinds of e-billing:
The first of these is e-billing via a bank web site (tied to a customer account). This is typically very limited in as much as a bank will not electronically present the bill or invoice, and in many cases may only allow customers to pay the large billers (such as utilities). They may also allow only cleared bank funds to settle bills and not credit side options, and offer limited or no bill history/storage options.
The second kind of e-billing is via e-mail (typically as a PDF attachment). This process is dependent on not only having an email address for the bill recipient but requires that the bill is printed and settled in the same way as a posted paper-bill. While this method saves costs in terms of postage and paper, in reality it is little different to the old-fashioned paper-based process that it attempts to replace.
The third kind of e-billing is the digital kind, whereby a bill is presented on a portal web site (such as www.payswyft.com) as a fully clickable document (for both bill detail, and payment). E-bills presented digitally look very much like the ones that are posted or emailed as attachments but are truly “live” or clickable documents that can be analysed, forwarded, and stored (as well as paid) electronically.
If we now return to our definition above, we can consider both the customer (or bill-receiver) experience and the merchant experience to see what each of the three kinds of e-billing offers in terms of efficiency and effectiveness.
The customer or bill-receiver experience
In all three kinds of e-billing the service is typically free to consumers and they avoid having to physically open envelopes and sort each bill individually.
In bank site e-billing, the consumer cannot see his or her bill (which would depend on some very clever technology with every biller –small to large, to allow this to happen). Hence the bank site e-billing option is very much concerned with payment only (and even this may be constrained). Hence, we might score this method for the customer at 3 out of 5 in terms of efficiency and 2 out of 5 in terms of effectiveness.
In the e-mail attachment process, the individual gets to see his or her bill quickly but can rarely do much else with it. This means that he or she may have to print, copy, store and even pay the bill using other systems or even by off-line means such as writing and posting a cheque to settle it. Hence, we might score this method for the customer at 2 out of 5 in terms of efficiency and 1 out of 5 in terms of effectiveness.
In the fully digital e-billing process, the consumer can print a bill only if they wish to, forward it, store it and pay it flexibly on-line (and in the same system and/or on the same web site). In addition bill storage and analysis is much more flexible. This saves both time and money for the consumer. Hence, we might score this method for the customer at 4 out of 5 in terms of efficiency and 5 out of 5 in terms of effectiveness. Clearly this is much better than either of the other options.
The merchant experience
In all three kinds of e-billing, the service is certainly potentially more effective and efficient than paper-based solutions but this is unlikely to be enough for a merchant who wants to invest in this approach.
In the bank site e-billing process the merchant will not be able to give customers an electronic bill (and will therefore have to continue to present it by post or email attachment). In addition, they may pay the bank for their merchant account (with fixed and variable costs) and not necessarily get additionally payment options for customers unless they pay what may be quite high per transaction fees. Hence, we might score this method for the merchant at 3 out of 5 in terms of efficiency and 1 out of 5 in terms of effectiveness.
In the e-mail attachment process, the merchant can save paper and postage costs (but only when consumers are prepared to turn off paper-based bills) and get some efficiency of delivery in terms of speed (as long as they have accurate email addresses of course). However, the reconciliation process is still likely to be unchanged and there may be little change in speed of payment by customers. Hence, we might score this method for the merchant at 2 out of 5 in terms of efficiency and 1 out of 5 in terms of effectiveness.
In the fully digital e-billing process, the merchant gets to upload their bill in pretty much the same format as they would have posted it (and probably save a little money on the cost side here). However, the far greater benefits will typically come from considerably better reconciliation and faster settlement (because of greater consumer-friendliness and more payment options being made available). Hence, we might score this method for the merchant at 4 out of 5 in terms of efficiency and 5 out of 5 in terms of effectiveness.
Summary
E-billing is more efficient and effective than paper-based billing for both the consumer and the merchant. However, not all e-billing solutions are alike and digital billing represents a major won-win for everyone.
Sunday, 26 December 2010
Why should a business care about introducing e-billing?
Electronic billing (or E-billing for short) has been in the news a lot in recent years and has been widely introduced in bigger businesses like large utilities, telcos and even council organisations. But many small to medium sized enterprises (and quite a few larger ones) are still not convinced about the overall benefits and take the attitude that their existing approach is fine as it is-taking the view that “if it isn’t broken, then why mess with it?” While this may have been a reasonably tenable position two or three years ago, with faster connection speeds, increased use of the Internet by the general population and more and more ways to get on line now, the reasons to care about e-billing have become a lot more compelling. Let’s therefore look at the main reasons why every organisation (no matter what their size or business activity) should now take this very seriously:
1. First and foremost the use of full e-billing (and not just going to the half-way step of sending out an invoice by email attachment) can save a huge amount of money for an organisation (and for its consumers too). Research suggests that an average cost of sending each bill (and getting it paid) is as much as £15.00. E-billing can reduce this by as much as 65%, or to as little as £5.00 per bill-that can be a lot of money saved if you are sending out hundreds or thousands of bills each year.
2. It is much more convenient, fast, and easy to bill or invoice people on-line. There’s far less preparation time for a bill or statement to be sent or to arrive in the physical mail and any bill recipient can view his or her bill from the comfort of their home (or indeed from any location worldwide).
3. Even more beneficial is that an e-bill is accessible by customers 24/7 (and 365 days of the year) and thereby allows bill recipients to log on any time of the day or night to view the account and pay online.
4. With an e-bill (or what is perhaps better described as a full “digital” bill) there is often a multitude of immediate ways to pay or settle the bill while on-line. This means that with just a few clicks a bill can be paid by credit, debit, cash or other options, with no need for the recipient to have to write out cheques, post off a payment or have to go to an approved outlet (like a post office) to make a payment in person.
5. Research consistently suggests that customers pay e-bills 20-25% quicker than those sent by physical mail (thus helping to improve overall cash-flow).
6. An e-bill is very flexible in terms of storage and retrieval (saving data for longer and much more cost effectively). Sending organisations and recipients can save all bills/invoices on a good system (such as at www.payswyft.com). This means that all sorts of subsequent analysis can then be carried out. For the consumer this may be patterns of consumption or spending on different bills, and for an organisation it may be patterns of payment methods or relative time taken to open and pay a bill, for example.
7. Because e-bills are stored on-line as digital records, the data can easily be uploaded and downloaded as desired. This makes for easy transfer to and from spreadsheets and accounting systems. Perhaps more critically, this makes reconciliation considerably easier (cutting the need for expensive manual processes by a much as 80% and driving a large part of the savings in point 1).
8. Last but not least, E-billing allows the electronic bill recipient to reduce paper usage, which is naturally much friendlier to the environment.
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 customers. For this reason, e-billing should now be a key strategy for every business.
1. First and foremost the use of full e-billing (and not just going to the half-way step of sending out an invoice by email attachment) can save a huge amount of money for an organisation (and for its consumers too). Research suggests that an average cost of sending each bill (and getting it paid) is as much as £15.00. E-billing can reduce this by as much as 65%, or to as little as £5.00 per bill-that can be a lot of money saved if you are sending out hundreds or thousands of bills each year.
2. It is much more convenient, fast, and easy to bill or invoice people on-line. There’s far less preparation time for a bill or statement to be sent or to arrive in the physical mail and any bill recipient can view his or her bill from the comfort of their home (or indeed from any location worldwide).
3. Even more beneficial is that an e-bill is accessible by customers 24/7 (and 365 days of the year) and thereby allows bill recipients to log on any time of the day or night to view the account and pay online.
4. With an e-bill (or what is perhaps better described as a full “digital” bill) there is often a multitude of immediate ways to pay or settle the bill while on-line. This means that with just a few clicks a bill can be paid by credit, debit, cash or other options, with no need for the recipient to have to write out cheques, post off a payment or have to go to an approved outlet (like a post office) to make a payment in person.
5. Research consistently suggests that customers pay e-bills 20-25% quicker than those sent by physical mail (thus helping to improve overall cash-flow).
6. An e-bill is very flexible in terms of storage and retrieval (saving data for longer and much more cost effectively). Sending organisations and recipients can save all bills/invoices on a good system (such as at www.payswyft.com). This means that all sorts of subsequent analysis can then be carried out. For the consumer this may be patterns of consumption or spending on different bills, and for an organisation it may be patterns of payment methods or relative time taken to open and pay a bill, for example.
7. Because e-bills are stored on-line as digital records, the data can easily be uploaded and downloaded as desired. This makes for easy transfer to and from spreadsheets and accounting systems. Perhaps more critically, this makes reconciliation considerably easier (cutting the need for expensive manual processes by a much as 80% and driving a large part of the savings in point 1).
8. Last but not least, E-billing allows the electronic bill recipient to reduce paper usage, which is naturally much friendlier to the environment.
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 customers. For this reason, e-billing should now be a key strategy for every business.
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