Getting Paid

When I worked as an office assistant at a brass smelting company, getting paid, from the corporation's point of view, was a fairly simple process. The factory foreman handed me a greasy sheet of paper with a bunch of hand-written notes on it, from which I typed up an invoice.

Although we had no computers in the office, Jack, my boss, provided me with an electric typewriter.

I sent the invoice off in the mail and we waited for a check to come back from whatever company bought the brass ingots that were created in the factory. If the check was late (or if we were short on funds), Jack would call up the customer's president and yell at him until he promised to send money. When a check came, I checked off the invoice against the paper records I held in my drawer, stamped the back of the check, and took it to the bank.

There was nothing electronic about that factory. We were a "B2B" company because we sold raw materials to manufacturers, but we could make no claim to having an "e" in front of our "commerce." As with everything else today though, the cycle has been reduced. E-commerce's goal one the getting paid end of the business is to get the invoices out quicker, send them electronically, and get the money back as quickly as possible.

Kill the Messenger

The first and most obvious way to speed up the process is to eliminate the United States Post Office (or whichever mail authority is in charge if you're reading in another country). Preparing a paper invoice can take a very long time. The paperwork is sent to a billing clerk on a Monday. The clerk puts it on a stack of other paperwork, which the clerk probably won't get to it until the next day. The clerk then prepares it, puts it in an envelope, and places it in an "out" box at the end of the day on Tuesday. The mail clerk picks it up on Wednesday morning and drops it off at the post office on the way home from work on Wednesday evening. The post office won't process it until Thursday morning, and then it won't get delivered until Friday -- if you're lucky.

On Friday, at the client's office, a secretary will open the mail, sort it, and deliver it to the addressee. But it's Friday, so it will probably sit on that person's desk until Monday morning, when he or she will look at it over morning coffee, sign it, and send it off to the accounts payable clerk via interoffice mail. The accounts payable clerk will get it on Tuesday, and put it in an accordion file to pay 30 days from that day.

Eight days have passed before the 30-day term has even been applied.

That means the bill doesn't get paid until 38 days after the invoice first started on its course. Add another two days for the mail to get the check back to you, and you've got 40 days. An electronic system could eliminate at least ten of those days.

Invoicing Options

Having long since given up the financial services industry, I now work as a writer for trade magazines and newsletter publishers like IDG.

When I write something, like a magazine article, book, or newsletter, I send the publisher an invoice. I create the invoice in Microsoft Word and send it as an e-mail attachment. This has always worked for me because the Microsoft Office suite is pretty standard; almost every office in the country uses it and, thus, can read the invoice.

This is a very simple operation, but the strategy is the same as for the biggest companies. By sending an e-mail invoice, I am able to save the postage cost, and instantly send the invoice to its destination.

Although I personally may save three or four dollars a month in postage, a big company that sends out thousands of invoices a month could save some really meaningful money on postage and envelopes alone.

The biggest advantage to me, of course, is that I get my money a few days earlier than I would otherwise.

Moving to an e-billing platform brings some obvious advantages, including elimination of paper, savings on postage, and savings on administrative overhead. Also, because your invoices are now digital, the data on them can be more easily integrated with your other accounting applications without having to re-key anything. Electronic billing can be achieved through two main approaches: direct billing and consolidation.

Direct Billing

In the direct billing model, the company sending out the invoices most commonly sends out a periodic e-mail invoice and, at the same time, hosts billing information on a secure Web site. Customers can log onto the Web site to access and review their statements at any time. Payment can also sometimes be initiated electronically at the same time through the same interface.

The biller here maintains the most control over the environment.

Besides having control over the interface and all transactions, the biller can also make use of the site for secondary purposes, such as for marketing or providing information to its customers.

Consolidation

Consolidation, on the other hand, involves a third party that does billing for several companies. Instead of logging onto the seller's Web site, the seller's customers log onto the consolidator's Web site. From the customer's perspective, this could have a potential advantage. If several companies with whom a company does business all use the same consolidator, then they would only have to flog onto one location to access billing information for multiple sellers.

Consolidation gives the seller the advantage of offloading a lot of administrative overhead to a knowledgeable third party who already has the infrastructure in place to handle it. However, they do lose some of the personal touch and an opportunity to add marketing messages and provide the customer with other company-related information, such as newsletters and announcements of new products or services. One alternative is to use a service that hosts biller-branded invoicing sites. Using this technique, instead of requiring your customers to go to a central location where there are several different sellers, then they go to a single Web site dedicated to your information. It looks the same as if you hosted it yourself, and you are free to add as much marketing propaganda as you wish; the only difference is that a third-party hosts the site.

Once you've figured out how you're going to send out your bills electronically, how are you going to get the money? Sending out the invoices is only half the battle; collecting it is the rest. Next week, I'll talk about electronic payments.

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