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Cost Savings and Collaboration Drive B2B E-Payments
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October 14, 2002 (Computerworld) --
Too much of a good thing can be a problem, at least when it comes to business-to-business electronic payments. While there are only a few standard ways to make payments electronically - Federal wire, automated clearinghouse (ACH) or purchasing card - these methods are impractical for many business transactions because they don't convey much information other than who, when and how much. A business needs to know more, such as the invoice number, whether the invoice was paid in full, and to which account to credit the payment.
That's where electronic invoicing and bill presentment (EIBP) comes in, but a variety of vendors and incompatible technologies makes it difficult for a company to decide on any one EIBP system - especially when its business partners may pick a competing one.
"Competing vendors are not talking to each other," says Pete Lambert, a vice president of treasury services at Wachovia Corp. in Winston-Salem, N.C. "You've got different file formats. As a customer comes in to [the vendor's Web site] to review their bills, you have different downloads into their accounts payable systems."
As a result, the biggest growth in EIBP is happening among business partners that are grossly unequal, such as a large corporate buyer and its dependent suppliers.
"The larger companies prefer to do business electronically; it's much more cost-effective for them," notes Ken Vollmer, an analyst at Cambridge, Mass.-based Giga Information Group Inc. Those companies, in turn, put pressure on their smaller partners to sign up with the vendor they chose.
Growing Acceptance
Today, about 20% of all business-to-business invoices are sent electronically, according to Avivah Litan, an analyst at Gartner Inc. in Stamford, Conn. That number is expected to rise to 62% by the end of 2005. Collaborative applications will be the big story behind the growth, Litan says.
"With the Internet, you can talk about things line by line, you can partial-pay, negotiate terms online, link to procurement and sales processes," she explains. "It's not just about turning paper checks into ACH or Federal wire payments."
International Playthings Inc. in Parsippany, N.J., has 25 suppliers, mostly in Asia. The payment process for the $30 million maker of educational toys used to require faxes, letters of credit and a great deal of sitting around and waiting for various documents.
"It took a lot of faith to change the way we were doing business," says purchasing manager Holly Harrington. "But I can't imagine going back to the way we used to do it."
So far, International Playthings has saved $50,000 in invoicing and payment processing fees by moving its payments to an EIBP system from New York-based TradeCard Inc.
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