Old habits die hard. Just as many finance functions cling to spreadsheet reporting, countless customers prefer to pay their bills the time-honored way -- by mailing a paper check. According to results of a survey of predominately utility and telecom businesses by Kite, Ga.-based The Ascent Group Inc., 55 percent of consumer customers and 59 percent of business customers choose to pay this way; only 5 percent of respondents receive bills through e-mail or the Web, and 7 percent pay through the Internet.
But Brian Valente, senior vice president of marketing for Avolent, a San Francisco-based interactive e-billing software provider, says results of his company's research have tipped in the opposite direction. "Across all the surveys that we have done, at minimum 53 percent, typically greater, of end customers say they prefer some means of electronic billing," he reports.
Vince Callaghan, Chicago-based partner with consulting firm B2B CFO/CIO LLP, offers an explanation for these divergent results. He notes that usage of "electronic invoice presentation and payment [EIPP] depends on the industry. The medical community is having difficulty with standardization of the process and the cost to implement these systems for smaller organizations." On the other hand, "automotive and other manufacturing industries have adopted this practice as the standard method of payment. EIPP is a subsystem of the overall EDI methodologies that have become the integrated communication method of most large manufacturing industries."
Christine Kozlosky, vice president of The Ascent Group, echoes Callaghan's explanation. "A lot of these utilities are regulated, and their regulators for a long time have been against credit card payment because they don't want to put their constituents in credit card debt over their utilities," she says. Of Ascent Group's respondents, 85 percent are utility companies; telecom is the next largest group. At least one regulatory body governs 40 percent of companies surveyed.
In spite of many customers' preference for paying by check and regulators' aversion to credit card payment, most of the organizations in The Ascent Group survey are streamlining their A/R processes and achieving cost savings by offering some form of electronic bill presentment and/or payment (EBPP). "I was impressed that 79 percent of participants offer the ability to either deliver the bill electronically and/or accept an electronic payment," says Kozlosky. "It tells me that it's a maturing technology, that everybody's got it or getting it."
Survey respondents are gently nudging their customers toward this option through traditional promotions, such as bill inserts; bill messages; Web-site advertising; and, less commonly, direct mail, outbound calling and e-mail campaigns. They are also offering a variety of other electronic options: recurring automated clearing house (ACH) transfer, the most popular; credit and debit card payments in person, by phone, by interactive voice response (IVR) and over the Internet; and accounts receivable conversion (ARC), which converts paper checks to ACH at the point of sale.
The rewards for implementing EBPP can be significant. Savings to A/R from electronic payment alone, which in-volves purging many processes -- potentially reducing head count -- are substantial. "We've seen a DSO reduction of about 10 percent," reports Val-ente. But electronic bill presentment offers the greatest cost reduction. This tool wipes out the staggering cost of printing and mailing hard-copy bills. Another bonus is "the elimination of the transit time for hard-copy bills," says Callaghan. "E-mail and other electronic methods produce immediate transfer of the data to customers as well as allowing for an automated payment method," further eliminating the cost and delays of paper checks. The Ascent Group points out that ACH payments typically clear within one day, which translates into improved cash flow.
The benefits of EBPP span the full range of A/R activities. Callaghan adds, "The automation improves overall accuracy and reduces the non-value-added component of any operations, reducing overall costs and improving customer relations."