Everything you need to know about Billing & Payments


What you’ll learn


  • Discover how the billing and invoicing system will look like in the upcoming years and manage your business to adapt to changes
  • Discover the must-haves of a billing and invoicing system in the current business scenario
  • Learn how the Billing and Invoicing process has come of age
  • Learn how metrics affect the Billing and Invoicing process


Overview

One of the most important aspects of a business’ order to cash cycle is the process of billing and invoicing and receiving payment in return. However, sending invoices only comprises a small portion of what actually goes on in billing and cash collection. The only thing that hinders the process is sending the invoices in a timely manner. This is important because customers only pay when they receive appropriate documents proving that the service/goods are going to get them on time. Explore more about how businesses have moulded them to suit the needs of the customer and how the process has evolved to incorporate technological advancements.

Introduction

As businesses continue to expand, the cut throat competition among them in a race to establish themselves as a mammoth in a crowded space doesn’t seem to mitigate anytime soon. The market is brimming with companies with overlapping visions and goals. Because of this similarity, companies need to have a differentiating factor that sets it apart from others. This is where Accounts Receivables and more importantly, Billing and Invoicing comes into play. The Accounts Receivables process at the time of billing and invoicing is often overlooked which might possibly snowball into reasons contributing to the gradual decline of a company. The impact your accounts receivable department has on your business is undeniable. Not only is it the department that allows you to get paid and therefore to make money, but it also deals directly with what is most valuable to your business: your customers.

Billing and Invoicing plays a pivotal role in customer relation building for your company. It is the only process in Order to Cash cycle where your company is in direct contact with the customer. In fact, it is the only touchpoint that affects your relationship with your customer. Excellent customer experience has always resulted in enhanced business growth. Not only does a memorable experience trigger brand loyalty, but it sparks word of mouth, which is certainly the most effective marketing tool of our age. Yet, businesses pretty much ignore all this and still use archaic methods. While Latin American and many European and Asian nations are already advanced in this field, a vast majority of other nations are also taking strides in having an advanced Billing and Invoicing System.

The Traditional Billing Process

The Process Description

A very important part of any business’s Order To Cash cycle is the process of generating invoices for the goods/services sold, sending invoices, and getting paid in return for it. The traditional Billing and Invoicing process, in sharp contrast to the current process, relied heavily on a manual intervention which not only slowed down the entire process but also made it difficult to settle disputes.
The invoicing personnel that oversee invoicing and billing needed to manually generate paper invoices with the help of reference documents such as:

  • Purchase Order
  • Proof of Delivery
  • Delivery Receipt
  • Shipping Documents

Data points like costs, credit terms, shipping dates, etc. were filled out manually so that the invoices could be sent out as soon as possible without any delay. The invoices usually were sent out by two means:

  • Physical – Fax, Postal Mail
  • Digital – Email, Downloaded

Physical

Issuing an invoice physically means creating the invoice filling up the necessary details and then creating a printed paper copy that is sent to the customer either via fax or postal mails or other physical means.

Digital

Digital mode of issuing and sending invoices is a faster and better way of sending invoices than the physical means. One way to do this is by creating an electronic PDF copy of the invoice and save it locally and then distribute it via electronic means like Email or upload to portals for the user to download it later. Not only is this a faster way of sending invoices, but also helps reduce overdue invoices.

Problems with Manual Invoicing

  • Time-Intensive: Manually sending the invoices is a time consuming and wasteful process. The time of sending invoices depends upon the speed of postal service which may cause a significant amount of loss to a business.
  • Error-Prone: Without simpler forms of invoicing, there is a significant amount of invoices that need to be handled manually by the staff. The staff handles hundreds of invoice on a regular basis and there lies a possibility that the manual handling of invoices might lead to erratic sending or printing of invoices which would further delay the paperwork.
  • Increased Costs: With invoices being sent on paper, there is a significant cost associated with sending it as well as storing it for further reference.
  • Less Visibility: The invoices are sent physically on paper and stored in off-site warehouses for further reference. The staff has to manually search through millions of documents to find the right one. Moreover, paper invoices are subject to wear and tear which makes it further unsuitable as a means of transaction.

Evolution of the Billing Process

Phase I:The initial phases mark the beginning of invoicing in the supply chain system by the use of paper invoices as a means of transaction. The companies had dedicated staff employed to manually print copies of invoices in certain formats and then include specific details of the transaction and then send it via snail-mail. The staff had to have a financial bookkeeping system which bore details of the invoices from the supplier. This was a time and labour intensive process and was prone to human error.

Phase II:The next phase saw the digitization of the invoicing process with the advent of the internet age. Companies now generated electronic copies of the invoices and saved it as PDFs to be sent across the internet via electronic mails for the user to be downloaded later. It was a major leap as now companies spent significantly less on paper and ink. Furthermore, now companies could better track invoices and use it for later references.

Phase III:As the internet age began to pick up the pace, companies now leveraged it to make the invoicing process more seamless. By now, the internet and personal computers were ubiquitous and corporations took advantage of it by uploading the invoice copies on portals for the user to download and pay via the portal. More often than not, customers uploaded the invoice copies on the portal which was verified. Customers then clicked a link that redirects them to a secure payment processing page where they could enter their credit card and bank information for a secure and seamless payment experience.

Phase IV:Over the last few years companies have developed their own frameworks and implement the invoicing solutions over the cloud to not only achieve a greater degree of personalization but also a greater degree of integration and efficiency. Integration makes it all the more easy for automatic data updates and updates regarding ERP. Where once an invoicing program was simply used to write and send invoices, now it can also be used to track and record time, manage projects, schedule meetings, send emails, and so much more.

Phase V: This phase marks the advent of AI into this sphere. With AI into play, companies can now predict the metrics essential beforehand that saves a lot of time and effort which earlier was not possible. Companies can now automatically scan paper invoice copies and make a digital copy for it to be fed into the ERP. Automation of key processes not only reduce manual effort but also ensure minimal error. Mobile Invoicing is yet another aspect that cannot be ignored. All the billing and invoicing can now be done via handheld devices. Corporations could send, approve and pay via a mobile device. There is a wide range of applications that support such billing and invoicing methods.

The Present Scenario – The In’s and Out’s of the current process

The current billing and invoicing process across every business has the following features:

  • Single Self-Administered Portal for Customers and Suppliers
  • Invoicing and Billing is relatively one of the most important aspects of the Order To Cash cycle where most of the action takes place whether it is the invoicing or billing. The customers and suppliers should at all times be on the same page to ensure a seamless transaction process without any overdue or dispute. However, more often than not, there is a lack of transparency among customers and suppliers that might later snowball into larger problems. A centralised portal is something that helps customers and suppliers be on the same page at all times and easily view and track invoices without the involvement of any third party. With a centralised portal in place, they can communicate seamlessly resulting in lesser overdue and disputes. Visibility makes it easier for companies to assess A/P and A/R operations to develop the necessary strategies for improvement, thereby ensuring stability and control. It also provides a simplistic way of collaboration between AP and AR teams that otherwise worked in silos.
  • Over the last decade, there has been a radical shift in customer behaviour. Unlike before, customers now like to have more control over how they manage and handle things. This has led to companies shifting their focus accordingly. A lack of self-serving portal only leads to the cost of managing and handling customers being absorbed by the organization, lowering performance and increasing DSO. Too much dependence on the A/R team makes it prone to errors and difficult in monitoring invoices. Moreover, invoice approvals and information retrieval is a lengthy and cumbersome process. Increased dependence on the A/P and A/R teams increases operational costs and thus companies spend way too much money on something that can be done easily with automation. By enabling self-service, there is not only a lesser dependency on AP and AR teams but also a reduction of operating costs by over 30%. Resources that were earlier wasted on a low-value process like manually monitoring invoices could now be relocated to other processes.
  • Automated Invoice Presentment
  • The earlier invoicing process involved sending the invoices manually making it a time consuming and wasteful process. With the option of electronically sending invoices via electronic means, businesses have made use of it by offering a centralised payment portal that allows you to upload copies of the invoices to be accessed by the customer as per their preference. Not only does it better utilise the resources, but also provides customers with a better way of dealing with transactions in a growing B2B world. Finding relevant information becomes quick in sharp contrast to the staff manually searching through a pile of paper invoices. The costs of manually storing the paper invoices in the office or off-site warehouses do not add up anymore. Customers can now download multiple copies of the invoice from the portal without having to request the A/R team to send the invoice back again. The availability of electronic transactions also makes it easy to convey errors in the invoices. Errors can be conveyed via the system in real-time without having to wait until the due date or waiting for any correspondence.
  • Invoices are documents that may be subject to change because of many factors. There is not a fixed standardized format that is followed universally and varies depending on the need, details enclosed and the purpose of the transaction. In everyday business, there are millions of transactions that go through and yet millions that need an invoice to complete one. One parameter to evaluate a business’s credibility is its ability to mould invoice formats according to the needs of the transaction. Businesses, now let the customers choose their preferred format of invoices and send them invoices across multiple channels like EDI, emails, post, fax, etc. With an array of dynamic invoice formats under the customer’s disposal, the customer can choose from thousands of formats to get to the right one without burdening the customer support for tweaks and changes.
  • Paper Invoices sent via postal mail were more of a burden than an asset. Invoices once sent manually cannot be tracked whether it has been received, processed or paid. Businesses now opt for a centralised repository that lets their A/R team insights regarding whether the invoice was downloaded, opened or any other action from the customer’s end. With such portals in place, the A/R team can not only view and track the invoice status and make changes or develop the necessary strategies for improvement, but also bring a level of stability, control and oversight that otherwise is absent in a manual system. An oversight from the business’ end ensures that excuses such as invoice weren’t delivered, or could not be found among the hundreds of emails received don’t stand anymore.
  • Another factor that businesses take into consideration is the huge print and mail costs that they had to pay to manually send invoices. Even after digitization of the process, companies had to pay a significant amount to third party portals and mass mailing services to let them use services. With personalized frameworks over cloud services, companies have revamped their invoicing process that has led to a reduction in monetary wastage over paper and ink and lockbox processing cost by 30%
  • Seamless Transaction
  • While e-commerce portals support one form of payment or other, there is hardly any portal that brings every payment option under one roof. There is rarely any portal that aligns with a customer’s preferred method of payment. Businesses, therefore want to provide a wholesome payment experience to the customer and are accommodating multiple payment options allowing customers to make payments in their preferred format. Such measures allow companies to inch a step closer to customers, thereby expanding their customer base and appealing to a wide range of customers with varying format preference.
  • Payment and Transactions in the B2B scenario are a complex ordeal. Businesses try to reach up to the customer expectations by not compromising on the speed and most importantly security that begs attention for the most part of the transaction. Payment portals that are slow might be ignored but the ones that are not secure grabs everyone’s attention. With major data breaches and leaks occurring on a seemingly constant basis, customers are more sceptical to trust that their money and information is safe with businesses. Businesses, therefore are more inclined to acquire safety and regulatory compliances and ensure customer satisfaction and assurance.
  • The traditional payment systems had now to identify the status of payment against an invoice. Payment portals now aim towards being more visible regarding the status of invoices and enabling the customers to know more about the payment information.
  • Proactive Dispute Resolution
  • Transactions take place all over the world. While some transactions might go through, there are few where there might be contentions. Such contentions should be resolved as quickly as possible by businesses to avoid write-offs. Businesses now act as a bridge between people that reside on different ends of the globe. Businesses make it possible for people on different ends of the world come together and carry out their transactions. Any dispute in such a case might be very hard to resolve. Therefore, businesses now encourage the use of portals that allows the customer to create a dispute as soon as they receive the invoice, which wasn’t the case otherwise. Customers would now do not have to wait until the due date to file a dispute. There are portals that also have the provision of receiving additional backup documentation to resolve deductions quickly.
  • Now, companies provide services that let the disputers know about the status of the payments without them having to make a repetitive manual enquiry to the customer service and get their job done. The status of a particular dispute, as well as the final decision regarding its validity, can now be communicated to the customer directly.

In the foreseeable future

Invoice processing and validation have come a long way from manually checking on invoices and sending via postal services to electronically sending and receiving on e-invoice exchange platforms. However, almost 90% of all invoices worldwide are still processed manually. Third-party providers also provide better value services but users hesitate because of high transactional fees. The market is, therefore, searching for emerging technologies to drive user growth and solving these issues.

  • Cloud:

A future in the cloud is inevitable as the design and strategy of major ERP providers are well suited and designed for easy implementation of cloud services. Cloud services are the precursors to AI and would pave the way to the onset of AI in this domain. Almost two-thirds of European invoices are sent and received via cloud services and the number doesn’t seem to stop. It is predicted that adoption of cloud could rise as high as 70% till 2025 which is roughly an increase in global public cloud service revenues from USD 145.3 billion to USD 278.3 billion. This major skyrocket in use of cloud services is primarily due to the wide array of benefits that cloud services provide:

  1. Lower and more elastic costs
  2. Agility
  3. Speed
  4. Increased collaboration
  5. Access to emerging technologies
  • Robotic Process Automation:

Even though there is a significant amount of automation in place, one drawback that still exists is the existence of a high proportion of repetitive manual work in the field of invoice processing. However, with RPA(Robotic Process Automation) the market might shift and achieve a greater value for repetitive work and rule-based processes by employing tools and bots that replicate human actions and directly interact with the system. RPA is instrumental in having a bot login to systems and extract information that is relevant, interpret it and then feed it into the ERP.
It is predicted that about half of the manual processes are to be substituted by RPA solutions with an expansion of market size up to USD 8.7 billion by 2024. This helps in the relocation of analysts from low-value jobs to other processes that cannot be automated.

  • Advanced Analytics:

Businesses want the processes that are more customer-oriented and hence they seek operational efficiencies. Dashboards and reports help dive into deeper details and help become more transparent as an organization. However, advanced analytics are supported by models, algorithms, and solutions that help drive customers to better transparency.

  • Mobile Invoicing:

Mobile Invoicing is an easy way of receiving and sending invoices on the go. The customers can now send and receive important invoices through their handheld devices anytime and anywhere without bothering to log into their respective portals. This is really flexible for clients and ensures a better cash flow and helps businesses reach out better to clients and offer better services.

  • Machine Learning:

Machine Learning, as an offshoot to Artificial Intelligence, is based around the idea that machines should be allowed to learn when exposed to data. This way machines learn from both structured and unstructured data, recognize patterns and build business rules using algorithms that cannot be built by humans. Organizations now have to deal with complex business scenarios and judgement based decision making because of which they seek cognitive robots. Thus, machine learning can be really handy for organizations to simplify invoice processing that requires a lot of cognitive effort. As predicted, Machine Learning as market service would grow at a compound annual growth of 47%

Conclusion

It is only a matter of time that leading B2B companies drive themselves towards automating their invoicing and billing system. European companies are on the look-out for an invoicing system that is not only automated but also complying with their tax administrative rules. Latin American nations have set a benchmark when it comes to incorporating new and advanced technologies to revamp their legacy invoicing and billing systems. A company that is moving forward and making strides in B2B world would surely explore the option of automation to be efficient without spending much, which is what every business would want to have when it comes to invoicing.

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