E-billing: Out in the cold?

The threat of serious disruption to postal deliveries refuses to go away, with the postal workers’ union having decided to ballot almost 150,000 Royal Mail workers for industrial action in a dispute over pay.

The Communication Workers Union is seeking a 5% pay increase and a minimum basic wage of £300 a week by October 2003. Deputy general secretary John Keggie has said an offer of 2% was a ‘pittance’ compared to salaries paid to executives in the industry. Ballot papers are being sent to union members this month and the result will be announced early next month.

So while the uncertainty for the great British public’s ability to send letters, rumbles on, are there any e-solutions to enable businesses to bypass late payment issues surrounding their finances?

Although legislation for late payment was introduced in November 1999 by then trade and industry secretary Stephen Byers, a recent study by IT services company Microgen has revealed 89% of companies interviewed are still paid late, a potentially crippling situation for UK businesses.

But the light at the end of the tunnel is that up to 60% of respondents have adopted or intend to adopt e-billing. According to company managers, missing invoices are the most common reason for late payment. Other explanations included queries surrounding price and delivery, availability of signatories for invoice approval and the debtor’s own internal administration.

Significantly, data has also found over 60% of companies believe the electronic distribution of invoices would be beneficial to the cash collection process. Electronic bill presentment and payment (EBPP) is one possible solution for businesses wanting a way to control cashflow through managed online payment and improving payment time, through early payment incentives.

While the UK may believe it has entered the technological age, when it comes to payments – particularly business payments – cheques in the post remain the mechanism of choice, despite time and cost limitations.

The situation has to change. Currently, the majority of UK suppliers want to be paid by direct credit, although most companies raise cheques to make payments. As a result, half of all payments arrive late. And, as most businesses will attest, late payments cause hardship, even forcing businesses to the wall.

One of the problems with cheque-based payments is the lack of control over finances. Not only is there no way of predicting a cheque’s arrival, but clearance takes three to four days.

And, while there has been a huge effort in the consumer marketplace to encourage the use of direct debits for regular payments, in the business community there is no standard payment mechanism that meets business need for cost-effective transaction costs while retaining control over making the payment.

Such payment problems compromise the success of online ventures: many cannot afford credit card payments costs and as a result, are looking for alternatives.

Some estimates suggest 70-80% of the world’s bills will be sent electronically by 2005, while researchers IDC expect a $1bn market for transaction-fee-based online payment processing by 2004.

EBPP applications – which range from traditional electronic data interchange solutions implemented by large organisations such as retailers – to interactive web browser-based solutions that require only a web browser and internet connection at the customer end. This is ideal for organisations with customers – B2B or consumers – who endure large costs controlling small-value invoices.

EBPP solutions such as from Albany Software are targeted at end of the market, delivering a web service that gives low cost access to customers – such as utility companies collecting payments for variable monthly bills, or telecommunications operators producing monthly telephone bills.

Using EBPP, customers can log on to secure sites to pay invoices utilising a variety of payment methods including variable direct debit, credit/debit card or cheque – where they advise cheque number and estimated date of receipt.

The customer has the visibility of outstanding invoices and can schedule automated payments to meet cashflow and business requirements. For the company awaiting payment, as soon as that payment is scheduled it will be informed of arrival date.

Technology alone will not ensure late-payers will change overnight. But, the fact that payments are scheduled and visible overcomes the need for costly and timely credit control to chase payments.

Many utility companies offer discounts for rapid payments which can be highlighted with online scheduling; and, should a company decide to implement the late payment penalty legislation, EBPP software could count down a warning for those in danger of missing a deadline.

It appears UK companies appear to be looking for ways to make it easy for the customer to transact business. E-distribution of documents to overcome the limitations of paper invoices is one potential initiative.

Martin Lear, sales manager for TotalCard, the UK fuel card operations of TotalFinaElf and the first fuel card provider to offer an e-billing service to customers, says: ‘While initiatives like e-billing cannot directly address a late payment culture, e-documents simplify the invoice approval process and make it easier to resolve price and delivery queries. The internet acts like an electronic filing cabinet’.

Oliver O’Reilly, e-commerce manager at Continental Tyres, adds: ‘Given the huge growth in internet usage, through e-billing we can save customers time and resources.’

Is the UK ready for e-payments? Apparently so, and looking forward, as digital signatures become more widely accepted, the ability to dispense with paper will increase.

  • A DTI survey last October revealed 89% of UK businesses have internet connectivity. Results are available at EXCUSES FOR LATE PAYMENT – Mother has died (3 times) – Dog chewed the cheque book – Can’t write cheque due to broken arm – The post box was set on fire. A piece of burnt envelope was sent in as proof. – The cheques have been stolen. ‘I can’t write out another one.’

Related reading