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 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.
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).