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Survey: Paperless Invoicing Gains Ground
Distributors must work with customers' invoicing needs
An electrical distributor in the Northeast delivers more than one-third of its invoices by email. More than 95 percent of its contractors who receive their invoices by email said in a survey they are satisfied or very satisfied with the delivery method.
About 70 percent said they like email delivery to “save time” and because they “get their bills faster.” Most would recommend email delivery to other contractors. This electrical distributor is not alone in its invoicing practices.
A recent report by Allen Ray Associates, Channel Marketing Group and BillTrust says that as companies become more comfortable with electronic processes, customers are gravitating toward receiving invoices electronically via email or by downloading them off a distributor’s Web site. Customers say they can invoice their customers more quickly and improve cash flow, more quickly reconcile purchase orders to invoices, and reduce manpower hours devoted to opening and matching invoices.
Distributors that are using paperless invoicing say they are doing so to reduce costs (paper, postage, toner), reduce manpower expenses, and reduce DSOs and enhance cash flow.
Paperless billing can be done in-house using ERP system or through an outsourced billing service provider. One electrical distributor quoted in the survey said one of its divisions sends one customer its invoices in QuickBooks format via email each night and is being paid in 34 days. Another echoed that sentiment, saying it was “pleasantly surprised” that six of its customers are paying earlier by about 10 days on average.
Here is a snapshot of findings from the report, based on a survey of electrical distributors and customers. Interviews were also conducted.
A trend toward increased faxing and e-mailing of invoices exists. The number of customers receiving invoices by email has gone up to 31 percent from 16 percent in 2006, and 34 percent to 51 percent for faxes. The number downloading invoices from a company Web site remained the same year over year. “With the advent of alternative invoice distribution methods, customers welcome the opportunity to choose how they wish to receive their invoices from their distributors. From a distributor viewpoint, this can represent an opportunity to differentiate.
“What becomes clear is that a strategic view of the invoicing process can help a distributor improve cash flow, reduce unproductive expenditures and create a more tangible connection with their customers,” the survey says.
Transition to electronic invoicing is inhibited by technological capacity or lack thereof. One customer said: “Four of my suppliers offer invoices on their Web sites, but our company can only print pdf files of these documents. What we really want is the ability to import or load all of the distributors’ generated documents, in particular invoices, into our accounting package.” Another customer said it receives more than 525 invoices a month from an independent distributor and has an error rate of 0.01 percent. The key is that he imports his invoices and has negotiated a pricing tolerance level with the distributor. He pays electronically in full every month.
Distributors and customers are both highly concerned about billing errors. According to this survey, errors are common. Thirty-five percent of respondents reported that more than 6 percent of their invoices have errors. Many factors contributed to these errors including backordered items, wrong items shipped, bad descriptions, pricing and quantity.
A distinct difference in time until paid appeared between national distributors and smaller independent distributors. National distributors reported being paid in 33 days while independents were paid within 45-75 days. The survey offers as explanation variations in business mix, credit collection practices or overall ability to offer e-invoicing options. It was also found national distributors are more likely to send invoices electronically.
More than three-fourths of distributors in the survey say they have not surveyed their own customers on e-capabilities and desires. “To achieve parity, and reduce collection time, distributors and their customers need to plug into each other,” the survey says. “A key step for distributors is to better understand their customers.” - Lindsay Young
Channel Marketing Group can be found at www.channelmkt.com, Allen Ray Associates at www.allenray.com, and BillTrust at www.billtrust.com.
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