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How to Set Up Online Billing and Payments

How to Set Up Online Billing and Payments

Feb 08, 2010 -

Setting up an online billing and payment system isn't just good for the environment. The convenience for customers can speed up cash flow -- a large advantage for any business.

Carlos, a friend who heads the credit function of a global manufacturer, has reduced Days Sales Outstanding (DSO) to a historical low, right smack in the midst of a deep recession. Though his company services hard-hit industries (apparel, automotive, furniture, etc.), his customers are paying faster than ever. This happened when he changed to paperless billing and an online payment system which has sped up cash flow, reduced carbon output associated with printing and mailing invoices, and dramatically lowered the time and costs of transactions for his company and his customers. In fact, his company saved approximately $60,000 per year by reducing expenses for printing and mailing invoices.

Here is Carlos’ two-phased approach.

Phase I: Replace paper invoices sent through the mail with electronic invoices sent via email.

1. Create a system to create invoices in PDF form. You can use a free program like CutePDF to convert almost any document to a PDF file, or sign up with an online billing service like Freshbooks that sends and keeps track of your invoices.

2. Gather and maintain email addresses for all customers.

3. Require all new customers to receive electronic invoices rather than paper ones.

Phase II: Enable customers to pay invoices online.

1. Sign up with a merchant services provider to accept secure online payments, or build your own custom system.

2. Create a payment processing workflow to keep track of clients who have paid, and remind those who haven't.

3. Set up and manage reconciliation methods to confirm accurate payment processing and settlement.

While there are costs involved in setting up an online payment system, the benefit of having payments processed quicker and thus having more cash on hand should outweigh the minimal cost per transaction. For Carlos, the expenditure for the system build was recouped in 3 months and, on a monthly basis, system maintenance expenses are significantly lower than bank fees.

The solution isn’t perfect: even electronic payments can be returned due to nonsufficient funds. But the “check is in the mail” excuse has been eliminated and DSO has improved.

 


Tags: customers, financial management, financialmanagement, julie rains, wise bread

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Article Comments (2)

  • Writer, Wise Bread

    (Feb 10, 2010)
    Many of the online invoicing applications created with small businesses in mind are allowing payment processing through Paypal, but very few seem to offer other payment option. I'd definitely switch over to online payments immediately if my invoicing tool integrated better with other payment processing options.

  • Senior Writer, Wise Bread

    (29 days ago)
    My source who runs a credit department offers lots of options, including credit card payments. Traditionally, most customers mailed a check (his business has been around for decades) but now they can pay via ACH transaction, which has saved thousands of dollars in lock-box/bank processing fees. Before, the checks went to a PO Box and were processed by the bank, so those steps and the costs associated with it have been eliminated.

    So going electronic has saved not only in printing and mailing costs, and sped up payment, it has also reduced bank fees. This application is similar to the new AcceptPay solution in that e-checks/ACH transactions.

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Julie Rains

Senior Writer, Wise Bread

(Wise Bread)

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