Case Studies: Cost Savings and Improved Customer Service Gained By Outsourcing the Billing Process
The benefits from eliminating manual processing and paper billing are extremely compelling. Here we look at two companies that moved the processing and distribution of invoices and statements to a third party, and they are glad they did! Have you ever added up how much it costs you to print and mail invoices and statements? If not, it might surprise you to learn the cost of paper bills is roughly $5 for a company that sends out 75,000 bills every month, that according to a 2003 Gartner Survey. If your billing volume is less than that, your cost per item is likely to be even higher. In contrast, electronic bill delivery runs about $2 each. For a company generating only 25,000 bills each month, moving to electronic bill delivery will save $900,000 yearly based on conservative estimates. Nick Rini, a columnist for Telephony, a trade magazine for communications service providers, estimates that U.S. companies could collectively save $200 million each day if they switched to paperless billing. Six- to Ten-Day Reduction in the Invoice-to-Payments Cycle
Though that sort of payback could serve as justification by itself, the benefits don't end there. You can also expect a six- to ten-day reduction in the invoice-to-payments cycle according to studies by reliable sources (Gartner and Deutsche Bankrespectively). A big part of the advantage comes through eliminating mail float, but you also gain from the early recognition and resolution of billing disputes. In addition, processing paper checks costs about $1.25 each, an amount that could be virtually eliminated through online bill payment. One of the biggest obstacles most trade creditors face in terms of migrating to an electronic invoice presentment and payment (EIPP) format is their customer's adoption rates. You can't realize the above benefits unless your customers buy in to the electronic process. While acceptance rates are growing, most business customers still are unwilling or unable to accept and pay invoices electronically. The really good news is that there is a transitional solution that offers substantial cost savings and operational benefits, while also laying the ground work for more comprehensive EIPP. By outsourcing the printing and delivery of invoices and statements, forward-looking creditors are able to begin realizing the benefits of moving away from costly paper-based processes. Greater Efficiency Sparks Cost Savings
That is exactly what IDEXX Laboratories (NASDEQ: IDXX) has done. With over $700 million in sales, IDEXX provides biotechnology, medical device and information technology based products and services to the veterinary and animal husbandry market places. Due to steady growth, the company's invoice and statement processing routines had become a sizable burden. "When I first came to work here, each of the individual divisions was mailing out their own invoices and statements," notes Melissa Seader, Manager of Accounts Payable and Accounts Receivable. "Conceivably a customer that crossed over several business units could get as many as seven statements in seven different envelopes, all arriving at different times. Clearly we were spending a lot of extra money on postage, as well as the time spent putting all these statements together and getting them in the mail." To solve the problem, IDEXX began to explore the possibility of outsourcing the processing and distribution of invoices and statements. They also needed a solution that would allow them to easily reprint statements via fax or email. In the end, they turned to Billtrust, who now downloads invoice and statement data from IDEXX and then handles all the processing and distribution. Not only does Billtrust aggregate all the invoices or statements going out to a specific customer from the various IDEXX divisions into one envelope, but they also pre-sort the mail to take advantage of lower postal rates. 30+ Percent Saving on Postage
The result has been a tremendous cost savings for IDEXX. Seader estimates that they are now saving over 30 percent on postage alone. When you are sending 29,000 invoices and 25,000 statements per month that can add up. In addition, IDEXX now does not get as many calls for duplicate invoices or statements, apparently because fewer envelopes are being mailed, and the new process ensures that there is less of a chance of them being misdirected. And when a duplicate is required, IDEXX's customer service and collection staffs can easily retrieve the item electronically and either fax or email it on the spot. The next step for IDEXX is to get more customers to get their invoices and statements via email or fax rather than through the mail. Customers can now call customer service or go online to request that all bills be sent by fax or email, but so far less than two percent have done so. Because IDEXX sells to a large number of veterinary clinics, which typically do not have sophisticated office operations, it is proving a hard sell to get them to migrate to fax and email. "Although it is good for IDEXX, you also have to convince the customer that is good for them as well," observes Seader. With a chuckle, she adds, "Part of the problem is that they are happy that they are now getting everything in one envelope." IDEXX is confident they can increase their customers' acceptance of faxed and emailed billings. IDEXX hopes to provide online customer self-service tools, which will further reduce their customer support costs. Transitioning to eBilling
One company that has had success sharply reducing the number of invoices they mail is Maurice Electric. Headquartered in Washington, DC, and with branch offices in Maryland and Florida, this $168 million per year electric supply wholesaler processes roughly 500 invoices on daily.Before they turned to outsourcing, 80 percent of those invoices were being mailed. The other 20 percent were faxed, but there was no way to email invoices. Outsourcing invoice processing with Billtrust solved that problem and more. "Outsourcing is saving us an enormous amount of time. Every morning we had two people spending the first hour or so stuffing envelopes and mailing invoices. We don't touch anything anymore," boasts Herb Bloom, credit manager. Just as important is the opportunity created in terms of email capabilities. "I have since put a very big effort into getting customers to accept their invoices via email or fax, and now that number is probably is over 50 percent," adds Bloom. Productivity Increases
Besides a huge reduction in postage, derived from both the efficiency provided by Billtrusts technology platform and being able to markedly increase the number of invoices that are transmitted electronically rather than mailed, Bloom has been able to rededicate his two staff members to credit and collections. The benefit is roughly equivalent to getting an extra person for two days per week. Another major benefit has been the ability to merge customer signatures
acknowledging receipt of goods with the invoice files. One way Maurice Electric captures signatures is with a signature pad at their registers. In addition, their drivers' receipts are scanned when they return to the shop. These electronic records are included in the A/R file sent to Billtrust each day, and are thereby included in the invoice template. "Calls to request proofs of delivery are now non-existent," says Bloom, " and that sure makes it a lot easier when you are trying to do collection work." The invoice templates also contain the company's logo, and the format improvements that have been completed as part of the outsourcing process make it easier for customers to distinguish Maurice Electric's invoices. This wholesaler is now also able to export bills in electronic formats, such as for Quickbooks and Peachtree, accounting packages popular with small contractors. The bottom line, according to Bloom, is that "we get our invoices to the customers faster and the customers love it." How a Third Party Can Help
According to Flint Lane, President of Billtrust, companies that send out as few as 2,000 bills per month will realize sufficient savings to justify outsourcing their billing process. He adds, "for just about any size company, the benefits of outsourcing the bill delivery process are similar to the outsourcing of the payroll function." The benefits you will realize in terms of productivity, labor savings and operational costs center around the efficiency of the vendor's mail distribution process, formatting and enhancement capabilities, and access to electronic distribution. Because it is highly unlikely you will be able to completely transition from paper invoices and statements to electronic formats, mailing efficiency is critical. The following capabilities are therefore extremely important: 1. The ability to barcode and pre-sort envelopes by zip code ensures you pay the lowest postal rates available for first class mail. 2. The technology that enables you to consolidate multiple items going to the same customer into one envelope. This can be done on a daily basis, or at longer intervals (typically a week) if your billing cycle allows. The fewer envelopes sent, the lower your postage costs. 3. Fully automatic processing (printing, stuffing, metering, etc.) eliminates labor costs. 4. Volume purchasing of paper and envelope stock reduces costs an additional several cents per item mailed. Formatting and enhancement ensures that your invoices and statements provide all the information your customers need in an easily readable format. Maximum benefit in this regard is derived from the billing outsourcing firms' technology platform coupled with their experience and knowledge of billing best practices. The underlying key is the ability to extract vital information from all your systems and then incorporate it on your invoices and statements. Eliminate Paper
Access to electronic distribution enables you to achieve optimal efficiency and cost savings by eliminating paper. Faxing and email capabilities are just the start. The next step involves transmitting invoices in formats that can be directly imported into your customers' payables systems. The advantages to this over the simple transmittal of an electronic document is triggered by quicker processing and lower processing costs for your customer, resulting in a shorter payment cycle and increased customer satisfaction. Invoice and statement gateways, especially when they include payment tools, facilitate customer self-service activities that include dispute identification and notification, further reducing costs for all parties and facilitating a shorter payment/settlement cycle. Any firm that provides you with an outsourced billing solution should also deliver management reporting capabilities that allow you to monitor the entire distribution process. This includes total visibility of the documents being sent. That in itself can be extremely valuable. Likewise, process visibility provides data and intelligence that you can leverage to continue to improve your operations.
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