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Finance glossary

What is e-billing?

Bristol James
10 Min

For most businesses, sending customers a bill and collecting the payment for goods or services provided is critical in maintaining operational efficiencies, keeping cash flow at healthy levels, and enabling the continuation of the business itself. For years, the billing process required businesses to print invoices, send a paper bill in the mail, and wait for a check to come back, often taking weeks at best.

Now, with electronic billing, electronic invoices (e-invoices) can be sent, and payments can be received online, cutting down the timeline of the billing process drastically. Use an electronic billing system like Eftsure or standalone accounting software to make e-billing possible. Today, e-billing can be largely automated, too. When a purchase order is created and delivered upon, the billing system can then generate an invoice, send it directly to the customer’s system, and process the payment once the customer settles the bill. In practice, e-billing can look like:

  • A phone service provider sending automatic bills to a customer through the user portal. The customer can set up auto-pay or log in to their account to pay their monthly statement online.
  • When a restaurant supply store provides the same monthly order to a local restaurant, the supplier can send e-invoices on a monthly basis, allowing the restaurant owner to pay the bill with a credit card or other method online.

Take Things Up a Notch: Self-Billing

To streamline the billing process even further, self-billing is becoming even more popular. In this form of e-billing, if a formal agreement is in place, buyers of the goods or services can prepare an invoice themselves, taking it off the seller’s plate, and streamlining the accounts payable process. The buyer then sends a copy of the invoice to the seller and submits payment. A few key considerations of self-billing are:

Accuracy is a priority

For self-billing to work, the buyer must commit to creating an accurate invoice for all transactions. The amount of goods or services, as well as the price and other relevant information, must directly reflect the order at hand.

A prior agreement is in place

Self-billing is not something that a buyer can just start doing. There must be a contractual agreement in place that allows the buyer to initiate the self-billing process.

Consistent method & formatting

When sending an e-invoice, it must contain all critical information in order to be processed and accepted by the seller. The best practice is to create a uniform e-invoice template and use it time and time again for consistency. Be sure the template includes the date, invoice number, product details, payment amount, tax amount, and any other necessary information.

Ongoing monitoring

Despite not creating the e-invoices, sellers are allowed to audit or verify invoices at any time. This helps maintain a high level of integrity throughout the entire process.

Unchanged payment process

The self-billing payment process doesn’t look any different than a normal e-billing payment process would; the buyer still submits payment through whatever channel has been agreed upon.

Legal requirements

Legally, it’s important that self-billing processes consider all tax and regulatory requirements of the wherever the transaction is taking place.

How does e-billing actually work?

An effective electronic billing system is a game changer for AP automation and business productivity, but how does it actually work? If you’re ready to never send another paper bill again, these simple e-billing steps are all you need.

  1. Customer Onboarding: Any seller that utilizes e-billing will need to onboard new customers and add their billing information to the billing system. This step is crucial in automating the billing process entirely.
  2. Bill Creation: With the customer information and a new purchase order, all information needed to create the bill is at the ready. Simply input the billing info needed to finalize the billing document.
  3. Send the Bill: After it’s created, the next step in the electronic billing process is to distribute the bill to the respective customer, notifying the customer’s AP team that a payment is due.
  4. Payment Reminders: If the invoice due date is approaching and a customer has not yet paid their debt in full, send automated email reminders right to their inbox. With most billing systems, you can set specific rules for this step, such as, “Send a reminder 5 days before the due date.”
  5. Payment & Completion: When the accounts payable team from the buyer side sends the funds and completes the outstanding payment, the e-billing process is finished.

 

Information needed for e-billing transactions

Since e-billing is meant to make bill payment a breeze, e-bills may include more information than a traditional paper bill, like a link to an online payment portal where buyers can use a credit card to settle their bill. However, e-bills still need to have the same functionality as paper bills, so they’ll also include all data points that you’d normally see on paper bills, such as:

  • Issue Date
  • Payment Due Date
  • Billing Information
  • Description of Goods/Services Sold
  • Quantity
  • Price
  • Tax Amount
  • Total Due

E-bills should not be overly complex or filled with too much information, but it’s important that all the necessary financial data is stored in these documents. When referencing old e-bills for audit purposes, it’s of the utmost importance that they are complete and accurate.

E-billing benefits

For finance and accounting professionals, digital transformation is fundamentally changing the way work is done. Injecting new tools and technologies – like e-billing – into everyday business tasks will bring a wide range of benefits for employees, customers, and businesses as a whole. The most impactful benefits of switching to e-billing are:

Cost Savings

Most people don’t think about the money it takes to simply process an invoice, but often, multiple people are taking time out of their days to create invoices, verify their accuracy, prepare the associated payment, and deliver the payment to the seller. With e-billing, a lot of the human-led steps can be done by software solutions, greatly reducing the costs associated with billing. Even something as simple as getting rid of the cost of a stamp needed to send a check in the mail adds up over time.

Heightened efficiency

In the same ways that e-billing brings about cost savings, it also brings about better efficiency for hardworking accounts payables and accounts receivables teams. Instead of an analyst chasing down their supervisor to remind them to check their inbox and approve an invoice payment, the electronic billing system can send those reminders automatically, ensuring tasks are closed more swiftly and accurately than ever.

Easier auditing

For both internal and external audit purposes, transitioning from paper invoices to electronic invoices is one of the best things you can do to make the auditing process easier. No more scanning documents to share with auditors; now, they can simply look into the billing system itself to gather all the information they need.

Reduced errors

Humans make errors, but computers don’t. You won’t have to worry about data translation errors or incorrect payment issues. With e-billing, data errors are reduced significantly, saving businesses from the hassle of correcting payments or making adjustments in their financial systems.

Enhanced security

Checks can get stolen from mailboxes, paper invoices can be tampered with, and email threads can be shared with outside individuals, putting the traditional billing process at risk of a variety of security breaches. E-billing uses robust billing systems to improve the billing process, verify key data points, protect payments from bad actors, and monitor the actions of all parties involved. There are cybersecurity risks that come along with software solutions, but with the right cybersecurity protections in place, e-billing is a more secure approach for business transactions.

AP automation capabilities

Automating accounts payable processes goes much further than implementing an e-billing solution, but focusing on billing and invoicing is a great place to kickstart broader AP automation initiatives. By digitizing foundational business transactions, automation becomes a lot easier.

Improved data analytics

When all billing transactions were done on paper, that data wasn’t being collected or analyzed in a meaningful way. It would have been too tedious to scrape all invoices and outgoing payments for data, record that information in a system, and drive valuable insights from the data. But now, because all the data is already captured electronically, analysts can build seamless reports or analytical dashboards in no time at all.

Environmentally friendly

Getting rid of excess paper waste is one of the best things that businesses can do for the environment. By removing the need to print checks or invoices, at least two pieces of paper are being saved in every billing transaction. E-billing is an easy win for going green.

Top titles and roles that Rely on e-billing daily

The people who benefit from e-billing will largely be those who deal with incoming or outgoing invoices, such as AP and AR experts, but there are plenty of business functions that will experience a productivity boost with the right e-billing solution:

Accounts Receivable

Responsible for creating e-bills, the accounts receivable team will be able to populate and send invoices in a matter of seconds, but the wins don’t stop there. With automated reminder features and easier tracking capabilities, e-billing simplifies the payment collection process. Calling customers to remind them to pay their bills is time-consuming and can be awkward, but with an automatic reminder, AR teams won’t even have to think about making a call in most cases.

Accounts Payable

Although the AP team doesn’t send invoices or process incoming payments, it sits on the other side of the billing process. Processing incoming invoices and preparing payments for disbursement are much easier tasks when everything is electronic. The AP team is a key business function and making the lives of the AP staff easier will send ripple effects throughout any organization.

Accounting/Bookkeeping

Any time an accountant or bookkeeper is tasked with chasing down an accounting error, getting into the transactional detail is often the first step. E-billing enables more advanced search capabilities for the accounting team, so instead of digging through filing cabinets for a needle in a haystack, they can search for an invoice directly in the e-billing platform.

Customer Service

If a customer calls a business with any billing-related questions, the customer service agent can look for the answer in the system instead of asking a billing representative to sift through months of records and get back to them.

Safety measures: protection from e-billing pitfalls

There are a few modest risks that come with e-billing; electronic bills getting filtered to spam inboxes or working with customers to switch from paper bills to e-bills can throw a wrench in the implementation of e-billing, but they’re not major issues. The biggest risks to watch out for with e-billing are related to data privacy and security. Are you using proper two-factor authentication to mitigate outside attacks? Do you have cybersecurity insurance coverage? When it comes to fraud, cybersecurity risks, data breaches, and fake payments, take the following precautions to mitigate these risks:

Encryption and secure transmission protocols

Implement strong encryption methods and secure transmission protocols to protect sensitive billing data during the electronic billing process. No one wants financial information to be accessed by outside entities, and the best way to prevent that is by getting ahead of it. A popular and effective way to set safety protocols for e-billing and payments is through the implementation of segregation of duties. This requires multiple people are involved in the process at different stages.

Secure e-billing systems

There are many SaaS solutions created specifically for the billing and payment process. It’s no secret companies, especially accounting departments, have become the top targets for cyber criminals trying to intercept payments through phishing. Leveraging a software such as Eftsure ensures all account numbers are fact-checked in minutes before payments are processed, to ensure you pay the right people every time.

Access Controls and Identity Authentication

Going back to the two-factor authentication question above – have you implemented proper access controls and authentication methods for your financial systems? This goes way beyond e-billing; finance and accounting professionals deal with confidential data on a regular basis, so it should be impossible for anyone but those with access to see said data.

Security Audits

Test your protections regularly. By conducting security audits of all the systems within a business ecosystem, business leaders can identify security gaps and work to solve them before they are exploited. Cybersecurity is constantly changing; businesses should be evolving with it.

User Training

Anytime a new process or system is brought into the fold, successful adoption hinges on user training over most other factors. If customers and employees both know how to safely use the new e-billing system, then potential issues are a lot less likely.

Summary

  • E-billing allows businesses to send invoices and receive payments online, reducing the time and effort required for traditional paper-based billing processes.
  • Subject to prior agreement, self-billing simplifies the accounts payable process by allowing buyers to prepare invoices themselves.
  • There are many benefits that can be realized once e-billing has been implemented. Better data accuracy, enhanced reporting and analytical capabilities, and heightened security are just a few.
  • Strong encryption, access controls, custom e-billing solutions, regular security audits, and user training are crucial to mitigate risks such as data breaches, cyberattacks, and fraud in e-billing systems.

Background References:

 

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