Digital Invoicing for Online Transactions

By Elana Varon
Fri, November 01, 2002

CIO — For most companies today, B2B transactions start and end with the purchase order?with billing and payment still largely done the old-fashioned way, on paper.

But many companies are increasingly seeing fully digital transactions?including invoicing?as the wave of the future to save money and improve efficiency. For those companies that buy and sell goods or services online and use the Web to manage their logistics, electronic invoice presentment and payment (EIPP) technology?sending and receiving digital invoices?is the next logical e-business step. And it’s a trend CIOs need to pay attention to.

Early adopters of these new Web-based financial applications, including AT&T Wireless, Con-Way Transportation Services and General Electric, have begun to achieve savings throughout the enterprise. Among the benefits: In addition to lowering invoice processing costs, companies can reduce billing errors, improve cash flow, provide better customer service, and obtain more timely and accurate data for analyzing how they spend money or sell their products. A year ago, TowerGroup, a market research company, predicted that by 2005, the number of business and consumer bills that will be presented and paid electronically will approach 5 billion world-wide, up from 60 million in 2001.

Though companies have long known that they save money when they pay (or get paid) electronically, it’s the ability to manage invoices online that makes the business case. From a survey of more than 100 U.S.-based corporations with at least $100 million in revenue, Avivah Litan, vice president and research director of financial systems for Stamford, Conn.-based Gartner, concludes that suppliers that bill their customers electronically can earn back their investments?and save an average of $5.7 million a year?if a mere 2.3 percent of their invoices are "viewed, paid and disputed" online.

But there are still many hurdles to overcome. For instance, the break-even point for bill recipients is less clear. John Hagerty, vice president with AMR Research in Boston, observes that EIPP vendors first concentrated on helping sellers generate electronic invoices and are only now writing code to help buyers load the data into their ERP systems for processing.

The key to deriving the most value from EIPP technology is to integrate it with back-office applications like 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 Redmond, Wash. Given that integrating systems and processes is one of the biggest challenges CIOs face today, EIPP can further complicate an already daunting integration picture. But as more and more companies aim to eliminate paper from business payment transactions, it’s a challenge many CIOs will have to meet.

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