Most companies still bill and pay each other on paper, but an emerging trend—digital invoicing—is promising to make paper bills obsolete. While the concept of sending and paying bills electronically is not new, digital invoicing has only recently gained momentum. It's part of a bigger trend towards fully digital b2b transactions and satisfies industry's need to save money and increase efficiency. Electronic billing is becoming more widespread because "both billers and payers are more driven than ever to lower administrative costs and overheard," says Avivah Litan, vice president and research director at Connecticut-based Gartner Inc.

By 2005, up to 5 billion business and consumer bills worldwide will be sent and paid electronically, up from 60 million in 2001, said TowerGroup, a market research company, last year. The rise of digital invoicing during the economy's decline may not be mere coincidence. "It fits into the business climate that we're in," says Bob Novaria, BP North America treasurer.

Sending and receiving digital invoices—made possible by electronic invoice presentation and payment (EIPP) technology—brings many benefits. Not only does it slash invoice processing costs, it helps companies avoid billing errors, improve cash flow, bolster customer service and gather data more quickly and accurately for analysis. For example, Illinois-based Air BP, an aviation fuel and lubricant seller, has found that customers pay faster when they use the company's electronic billing and payment service because billing mistakes can be identified more promptly.

Companies that already buy and sell products or services online and use the Internet for logistics management are finding that electronic billing is the next logical move. Purchasers of products and services, more so than suppliers, are driving this trend. They are realizing huge payoffs by using their supply chain management systems to check digital invoices against purchase orders and delivery records and calculating what they owe—without any re-entering of data or disputing of billing errors over the phone.

Early EIPP technology users such as AT&T Wireless, Con-Way Transportation Services and General Electric, have already begun to see cost savings. Not only do companies save money by paying or getting paid electronically, but they also reap substantial savings by managing invoices online. Litan from Gartner surveyed more than 100 U.S.-based corporations with a minimum of $100 million in revenue and found that suppliers that send their customers electronic bills can recoup their investments—and save about $5.7 million annually—if only 2.3% of their invoices are "viewed, paid and disputed" online.

Deploying the technology can be challenging, however. While Litan has ascertained the break-even point for bill senders, the break-even point for bill recipients is uncertain. That's because EIPP vendors first focused on helping sellers create electronic invoices and have only recently started helping buyers process the data using their ERP systems, notes John Hagerty, vice president at AMR Research in Boston.

To get the most out of EIPP technology, buyers and sellers must integrate their systems. EIPP solutions have to be incorporated with back-office applications such as ERP, purchasing, accounts payable, order management and call center systems. "Integration is where you get the direct savings," says Judy Cavalieri, director of e-business strategy and marketing with AT&T Wireless in Washington. But integration gets tricky. In fact, companies are already struggling to integrate systems and processes; adding EIPP into the mix makes this daunting undertaking even more difficult. "The biggest technical issue that companies have is integration with a legacy system or ERP system," says Litan.

Currently, there is no EIPP solution in the market that is already integrated with an ERP, supply chain, CRM or financial management system. This means that EIPP vendors have many integration issues to work out to set up buyers and suppliers, including writing custom electronic invoice formats. Some companies, like Con-Way, are even developing their own EIPP system in-house. In about three years, however, companies can expect packaged solutions. Within that time frame, major ERP vendors will include Internet-based invoice payment solutions in their accounts payable software, says John Van Decker, senior program director with Connecticut-based Meta Group.

There is good news for the next wave of companies which embrace the technology—deployment will get easier and cheaper. "The next group of adopters won't have to spend as much money," says Aaron McPherson, research manager with Massachusetts-based IDC. He says companies can benefit from the integration work already put in by EIPP vendors. For now, the technology remains expensive—around $400,000, estimates Litan, for new invoice-senders—and difficult to deploy and thus best suited for big companies with tremendous billing or payment volumes. It's just a matter of time, however, before all bills get digital, says Suzanne Hawkins, senior counsel for legal operations at Connecticut-based GE. "It costs us less money to process an electronic invoice," she says. "Ultimately, we are not going to have any paper invoices."

Sources: Biller App
Joanne Kelley
Context, Aug./Sept. 2002
http://www.contextmag.com/archives/200208/Feature3BillerApp.asp

To Bill or Not to Bill (Online)
Elana Varon
CIO Magazine, Nov. 1, 2002
http://www.cio.com/archive/110102/bill_content.html