IMGCAP(1)]Today, businesses face an increasingly daunting range of challenges, most of which are exacerbating the high cost of operation.
As a result, nearly all business executives are placing a high emphasis on reducing operating costs and increasing process efficiencies, especially those related to back office procedures.
The primary objectives in such savings initiatives include eliminating manual effort and rework, accelerating the receipt of cash, reducing the days sales outstanding, and more effectively satisfying the customer base to ensure revenue retention.
These internal pressures are coupled with external demands such as the emphasis that cities and states are placing on the importance of going green. The situation intensifies as the demand for cost containment restricts the capital available for business expansion, and limits the resources available for meeting and maintaining compliance requirements. These inefficient business processes have a dramatic impact on the bottom lines of organizations in all industries.
Lets take the business-critical process of customer invoicing, receiving a payment from a customer, and settling that transaction within the accounts receivable system. On average, it costs companies $3 to $5 to get an invoice out the door and another $9 to $11 to process the payment when it is received. Customers receiving an invoice incur about the same cost to process the invoice, post it within their system, and get a check back out the door to their suppliers.
[IMGCAP(2)]If any manual effort is required to obtain the supporting documentation necessary for review, or if items are disputed for any reason, these costs can increase by two- to three-fold. Additionally, the costs of printing and mailing invoices for the majority of billers continue to rise as postage rates increase exponentially. Similar costs are borne by customers for the production and delivery of paper checks to satisfy their invoice obligations.
It is no surprise that these costs are at the heart of many of the business drivers for improvements and cost reductions. Likewise, the costs being shouldered by the customer are the primary reason for the growing demand for alternative methods of invoice receipt and payment.
So how do companies break free of the costly traditional cycle theyve been part of for years?
The short answer? Eliminate the paper from the process.
Start a customer relationship electronically. Instead of a paper credit application, send an electronic version. This will ensure that all the necessary data is in place, with no back-and-forth or follow-up calls. More importantly, it establishes an electronic approach as the communication method for the relationship going forward.
If you already have a paper-based relationship, its not too late. Share the benefits of going electronic with your customers. No paper no mail no keying no errors. The benefits will be obvious and enticing.
Sending invoices electronically means reducing your cost of paper supplies as well as postage costs; but removing the USPS from the equation also means your customer will have your invoice in a few hours rather than a few days. Eliminating mail time automatically reduces their time to process the invoice. In addition, with the inclusion of a data file, not only can the invoice be reviewed by multiple people in the customer organization via the web, but the invoice can be readily uploaded into an AP system for payment with no keying, no errors, and no extra manual touch points.
Should your customers AP process require any type of supporting documentation, such as a three-way match, AP personnel no longer have to manually search for documents to approve the invoice. Everything will be available at their fingertips by electronically linking all supporting documents, (proofs of delivery, certificates of insurance, tax exemption certificates, etc.) to the invoice.
Make payment as easy as possible for the customer and give them choices. Now that you have delivered the invoice to your customer (rather than the paper being lost in the mail or in a stack of papers waiting to be manually keyed in for processing), it is ready for payment. Accept any method credit/debit card, Automated Clearing House, lockbox, or even an old-fashioned paper check but offer incentives for customers to pay electronically. Its better for both parties, and saves everyone time and money.
Streamline reconciliation into your AR system. ACH is an extremely low-cost payment option for both you and your customers, but in the past it has been a nightmare for reconciliation. By marrying ACH (and all payments) to your invoice, you can achieve straight-through processing with a lower payment-processing cost, fewer exceptions and no manual intervention. Including a dispute management process to capture short-pay reason codes is another time saver and provides you with insight into other supply chain issues.
By following these simple steps for deploying electronic invoice presentment and payment, the business cycle between you and your customers will be transformed. You will be better equipped to meet todays challenges and will establish the roadmap for accelerating business in the future. As you start your journey, look for a solution that provides the benefits summarized below.
Key benefits your EIPP system should provide:
Online customer access and self-service visibility to invoices and other supporting documents through a secure portal or email technology. A supplemental data file provides additional benefit.
Automated dispute capabilities give visibility into dispute reason codes.
Customers can print, fax, e-mail and save PDF files for future reference, reducing future calls to the call center.
The solution allows you to achieve a lower cost per invoice and increased productivity through a 50 percent reduction of print and mail costs.
Cash receipts are accelerated and reconciliation is streamlined, resulting in a decreased level of days sales outstanding.
Because of the self-service capability provided by the system, call center inquires are reduced.
The solution controls the processes and document security according to the standards for compliance.
Tammie Calys is vice president of sales and marketing at Data Impact, and Sue Ellner is director of channel and strategic accounts for Data Impacts Northeast region.
