The Government has introduced legislation to ease the financial
burden of late invoice payment that is crippling UK businesses. Yet
few organisations seem likely to risk jeopardising key business
relationships by imposing penalties for late payment.
There is another option: electronic bill presentment and payment
offers businesses a way to control cashflow through managed online
payment and provides a platform for improving payment time through
early payment incentives.
While the UK may believe it has firmly entered the technological
age, when it comes to payments - particularly business payments -
cheques remain the mechanism of choice, despite inherent cost and
production limitations. According to research from automated
clearing house Bacs, while 89% of suppliers want to be paid by
direct credit, nine out of 10 companies still raise cheques to make
those payments.
As a result, half of all payments arrive late. And, as most
businesses will attest, late payments cause significant hardship.
Yet, recent legislation allowing businesses to charge interest on
late payments does not look likely to make any significant
improvements to the perennial "the cheque is in the post" problem.
One of the major issues associated with cheque-based payments is
the lack of control over finances. Not only is there no way of
predicting its arrival, but a business also has to wait three or
four days for the cheque to clear before it receives the money
due.
In the consumer marketplace there has been a huge effort to
encourage the use of direct debits for regular payments, but in the
business community there is no standard payment mechanism that
meets business needs for cost-effective transaction costs while
retaining control over making the payment.
Many online ventures cannot afford the high costs associated with
credit card payments and, as a result, are looking for cost
effective alternatives.
Figures from market analyst Killen & Associates predict that
70%-80% of the world's bills will be sent electronically by 2005,
while analyst firm IDC expects a $1bn (£709m) market for
transaction fee-based online payment processing by 2004.
These applications which range from traditional electronic data
interchange solutions implemented by large organisations, such as
retailers, to interactive Web browser-based packages that require
only a Web browser and Internet connection at the customer
end.
The latter solution is ideal for those organisations with many
customers - either B2B or consumers - who currently endure
significant costs in credit controlling many small value
invoices.
These e-billing and payment applications enable organisations to
streamline the invoicing and payment cycle by allowing a company to
present invoices, statements and credit notes to its customers via
any Web browser.
Presenting and paying bills electronically also provides an
opportunity to improve customer relations as it creates a platform
for regular customer contact such as marketing or support
messages.
It also enables customers to keep a track of their relationship
with an organisation. Invoices are online and the e-billing and
payment software provides a view of current status, including
scheduled payments, as well as enabling tracking back through
previous invoices to analyse trends in spend.
So is the UK ready for electronic payments? Yes, having operated
with Bacs for 30 years, the majority of UK companies trust online
payments. Looking forward, as digital signatures become more widely
accepted, the ability to dispense with paper delivery further
increases the value of the e-billing and payment solution.
Adrian Stafford Jones is managing director of Albany
Software