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E-BILLING
As the UK continues its slow
recovery from the recession, key
economic indicators are moving in
the right direction, from wages to
business lending. There are even
signs that UK productivity might at
last be on the rise.
One area that shows no sign of
improving, however, is late payment
and bad debt. In the latest
SME
Confidence Tracker Report
from
Bibby Financial Services, one in four
businesses said that they suffered
from bad debt. Around half of the
1,000 business surveyed said they
have to wait more than 30 days for
payment, with some having to wait
more than 100.
In a survey of its members
conducted by the Institute of
Directors (IoD) in December 2014,
66% said they had experienced
late payment of an invoice. Nearly
half (47%) said the main reasons
for late payment were excessively
bureaucratic payment systems or
overly complex terms and conditions.
Late payment has a big impact
that ripples through the economy.
Half of IoD members who had
experience of late payment said it
had forced them to change business
decisions; 13% were unable to grow
their business as planned; and 10%
had to re-organise their financing
arrangements. More than one
quarter (28%) said that late payment
had forced them to delay payment to
their suppliers.
Reducing DSO
Tackling late payment should be a
priority for any business. One of the
key measures in this struggle is day
sales outstanding (DSO), the average
length of time it takes a business to
collect its accounts receivable. The
higher the DSO, the greater the cost
to a business.
Consider the example of a
company with an annual turnover of
£20 million and a business borrowing
interest rate of 3%. If it has a DSO of
70 days, its total cost of borrowing for
the financial year will be £115,068
1
.
Reducing the DSO by 15 days
would provide an interest saving of
approximately £15,000.
So what can businesses, or more
specifically the credit control and
accounts receivable departments, do
to minimise late payment?
e-Invoicing
One solution is e-invoicing, defined
by the European Commission as
“the electronic transfer of invoicing
information (billing and payment)
between business partners (supplier
and buyer)” that “links the internal
processes of enterprises to the
payment system”.
In its 2015 report,
E-Invoicing,
E-Billing,
Billentis estimates that the
worldwide take-up of e-invoicing is
growing at about 20% per annum
and that in 2015 a little over 8%
of invoices issued globally will be
paperless.
Penetration is highest in the
Nordics, with an adoption rate of
40%, but e-invoicing is also growing
strongly in other parts of Europe,
where its use in business-to-business
and business-to-Government
transactions now stands at 15-40%.
Today, much of the impetus for
e-invoicing comes from the buyer,
largely because accounts payable
departments like to receive invoices
electronically to enable the full
automation and processing of
invoices for payment.
However, e-invoicing has benefits
for credit control and accounts
receivable departments, too. In
addition to tangible factors, such as
hard savings on print and postage
Neopost programme director Bren Standell explains how e-billing can help
accounts receivable reduce the time to payment
The benefits of e-billing
costs, and intangibles, like faster
dispute resolution, e-billing can
reduce the problem of bad debt and
late payment.
Big savings
At Neopost, we have found that
utilising e-billing for the order-to-cash
process and removing as much paper
as possible within our billing and
credit collection function has reduced
tangible operating expenses by more
than £150,000 per annum.
On top of that, it has enabled
us to cut our DSO to below 50 days
and to reduce the number of invoice
query calls to our contact centre.
A recent survey showed that our
adoption of e-billing has also helped
our customers process invoices more
efficiently within their own accounts
payable function.
E-billing helps accounts receivable
achieve these results mainly through
faster delivery of invoices and
improved query resolution.
Faster delivery of invoices
A sale is not a sale until it is paid for,
so the faster you are able to generate
and submit an invoice the better. This
is where replacing traditional paper-
based processes with e-billing offers
real benefits.
Revisiting our £20 million
business, let’s assume that it
operates within the B2B market
and has an average order value of
£200. Each day it processes 274
invoices (not including credit notes,
statements, dunning letters etc.), with
a combined value of £54,800.
With paper-based systems, it
could easily take 15 days for an
invoice created by this company to be
entered into a customer’s accounts
payable system – 3 days to generate
the invoice; 1 day for it to be printed;
3 days for delivery by second class
post; 5 days for invoice query and
resolution; and 3 days processing in
accounts payable.
Simply by digitising invoice
delivery, e-billing removes a number
of stages (and several days) from this
process, contributing to a better DSO.
Continued on page 28...
Half of IoD
members who
had experience
of late payment
said it had
forced them
to change
business
decisions
