E-invoicing: Automating the A/R Function to Speed Time to Cash

In today’s turbulent economic climate, businesses face a daunting array of challenges just to stay afloat. At first glance, many of those hurdles seem to be at direct odds with each other relative to the approach for addressing them. Most companies are being driven through internal mandates to reduce operating costs (particularly those related to back-office functions), accelerate the receipt of cash, determine methods for reducing days sales outstanding (DSO) and improve customer satisfaction levels.

External pressures are increasing as well. States and cities are starting to push ‘green’ initiatives for certain industries and upping the incentives for adoption. Customers have higher expectations regarding flexible options and enhanced service offerings available, and competition for new business is more intense than ever.

Meanwhile, the escalating emphasis on cost containment has imposed severe limitations on the amount of money available for new projects – particularly those with technology components that would require additional investment in hardware, software or internal resources. Internal IT staffs have been reduced to skeletal levels, and the resources needed to implement and maintain compliant business processes continue to soar.

Few would disagree that many current back-office processes are not as efficient as they should be, but many do not realise the tremendous costs and risks these inefficiencies introduce to their business and their bottom line.

Consider the business critical process of invoicing a customer, receiving payment from that customer and settling the transaction within the accounts receivable (A/R) platform. On average, it costs companies US$3-5 to get an invoice out the door and another US$9-11 to process the payment when received. Those customers receiving that invoice incur about the same cost to process the invoice, post it within their system and send a cheque back to their supplier.

Electronic Invoice Presentment and Payment

Given the acceptance level of electronic banking (e-banking) among consumers, a surprising number of organisations continue to rely upon paper-based billing and payment processing – prolonging an antiquated process that is expensive, increasingly inefficient, unreliable, and which slows the time to payment.

Alternatively, electronic invoice presentment and payment (EIPP) enables companies to send invoices and receive payments electronically, thereby reduce both the high transactional cost associated with paper methods and the longer time to payment inherent in tradition payment models.

Companies leveraging EIPP technologies not only save significant hard costs in reduced postage, material expenses, and bank fees, but also generate additional savings from more efficient processes and accelerated cash flow. Today, a wide range of flexible solutions are available to incorporate electronic payment (e-payment) processing with most accounting systems and enterprise resource planning (ERP) platforms.

Despite the growing evidence of the tangible benefits and competitive advantages realised by implementing A/R automation, many organisations continue to resist the change because paper-based methods are simply deemed to work sufficiently well. The persistence of this mindset among many billers warrants a frank evaluation of paper processing versus electronic invoicing (e-invoicing) from the A/R perspective.

The advantages of implementing an EIPP solution not only directly address the deficiencies of the paper-based transaction cycle model, but provide accelerated access to cash, reduced manual effort and associated errors, improved process efficiencies and overall reduced costs.

The cost and speed required to present an invoice or statement electronically is a mere fraction of that for the paper version, resulting in bottom line savings and faster integration into the receiver’s payment approval process.

A key component of an efficient EIPP solution includes the ability for the biller to present bills in the format most convenient to their customer – whether via web portal, email or fax. The more robust solutions also include the ability to send data files along with invoices, which allows the payer to import the data into their accounts payable (A/P) platform for reconciliation purposes. The result: cost savings and process efficiency improvements for the customer, faster payment approval for the biller and enhanced customer service all around.

EIPP solutions that offer the ability to electronically link underlying documentation such as purchase orders, proofs of delivery or shipping information to an invoice bring added benefits for the payer and more rapid payment approval for the biller.

When deploying electronic payment functionality within the EIPP platform, the availability of flexible payment options through automated clearing house (ACH) and/or credit card will also reduce the time to payment. Also, providing the ability for one-time, recurring payments, or future scheduled payments provides an additional level of flexibility for the customer. Most importantly, the solution should include the ability for the biller to receive a detailed remittance file mapped directly to the A/R platform for automatic ongoing reconciliation.

E-invoicing reduces print and mailing costs, boosts process efficiency and results in fewer inquiries as a result of customer self-service. E-payment accelerates receipt of cash, reduces DSO and streamlines payment processing and reconciliation. Providing ready, online access to support electronic document management results in faster approval by customers and improved customer satisfaction.

Ultimately, achieving customer-to-cash automation hinges on the following considerations:

  • Couple e-invoice presentment with payment through a designated website for customers.
  • Outline the data elements necessary for the customer to post into their platform in an automated fashion.
  • Make supporting documentation necessary for review available within the same platform.
  • As payment is made, couple the invoice details with the payment details entered by the customer.
  • From this data, the detailed A/R file can be generated for reconciliation into the supplier’s platform and a settlement file can be provided to the buyer.
  • The ACH file is sent separately to the bank – ideally, the technology/service provider handles both components of the transaction.

By selecting and implementing the EIPP solution that best addresses their customers’ requirements, and by providing flexible payment options and ready access to supporting documentation, organisations can realise news levels of operational efficiency, enjoy significant cost reductions and slash the time to payment.

What Are Customers Looking for in an Electronic Solution?

Electronic invoice presentment and payment (EIPP) with flexible solutions:

  • Business-to-consumer (B2C) presentment and payment.
  • Business-to-business (B2B) presentment and payment.
  • Payment only; presentment only; both – options.
  • Configurable, brandable site (colours, logos, fonts, etc).
  • Out-of-the-box, easy-to-use package for lower volume clients and middle market.
  • Low cost and quick implementation that drives to high value delivery.
  • Software-as-a-service (SaaS), hosted platform to reduce internal IT costs.
  • Support services that facilitate adoption by their users.
  • A modular approach that allows them to optimise existing processes.

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