EIPP systems promise to reduce the payment cycle from 55 to 25 days. But there are some huge hurdles to jump beforethat happens, including a lack of a common format for invoices.
Business-to-business e-commerce evangelists might preach otherwise, but the Internet has yet to alter one of the most basic business processes: how buyers pay suppliers.
Today, fewer than 1 percent of all invoices are delivered, processed, and paid over the Net, according to the Gartner Group Inc.
But manual invoicing methods are long overdue for revision. Typically, before a buyer pays a supplier, the invoice passes through a lengthy approval process during which each line item is matched against shipping documents and original purchase orders. When disputes arise, buyer and supplier generally must work them out by phone and fax. "It's excruciatingly painful," says Jeetu Patel, executive vice president of research for Doculabs Inc. (www.doculabs.com), a market research firm.
Electronic invoice presentment and payment (EIPP) promises to speed things up by allowing you to present, reconcile, dispute, and pay invoices over the Net. EIPP applications address the invoice-to-pay part of the process and are a natural supplement to Internet procurement systems, according to Brian Valente, vice president of marketing at Avolent (www.avolent.com), a company that creates EIPP protocols for client businesses. Other companies with EIPP products include Bottomline Technologies, BCE Emergis, and NetDelivery.
By managing the review and dispute adjudication process online and transacting payments electronically, EIPP systems could reduce a typical payment cycle from 55 to 25 days, says Valente. But planners must jump some huge hurdles before that happens. For one thing, no standards define a common format for invoices, and without such standards EIPP won't work. Then there's the task of linking EIPP systems to back-end databases.
If you're considering an EIPP solution, here's what you need to know:
Think strategically. "An EIPP is part of a larger business process that is done on the Web," comments Alan Neely, senior vice president for EIPP at BCE Emergis(www.emergis.com). If you are ready to move your procurement systems to the Internet, take the invoice-to-pay process into account now--down the road you'll have to link the systems anyway. If you've already begun to implement an e-procurement application, work with your current vendors to integrate invoice payment systems.
Allocate a budget. The Gartner Group estimates that the cost of buying software and integrating it into the buyer's and supplier's accounting systems--including linking to procurement and inventory systems--will exceed $2 million.
Calculate ROI. Delivering an invoice online costs US$1.65, versus $5 for manual delivery, Gartner estimates. Resolving a dispute via e-mail runs about $10, as opposed to $20 over the telephone. Transferring funds over the Net costs about $1.90 per transaction, compared with $4.50 per transaction for a paper check. Another way to save: Some billers spend $20,000-plus annually to ship invoices by Federal Express, just so they have proof that the buyer received the goods.
Pick a partner and get going. Identify your key partner in transaction volume. Analyze how your current invoicing process works with that company, and determine how many days elapse between invoice receipt and payment. How does your partner view automating the process? The answer will help resolve other questions on standards and vendors.
Don't wait for others to dictate. Within three years, buyers will demand that sellers enable them to adjudicate disputes electronically, says Patel. The cost of doing business will otherwise get too high. And standards will emerge when huge buyers that deal with thousands of suppliers move to EIPP, says Patel. "The Chryslers of the world are not going to deal with 1800 different systems," he says.