In most organisations, IT projects that show a tangible return on investment (ROI) are more likely to get to the boardroom table than those with un-measurable benefits.
The business case for e-billing is both tangible and measurable. Take the following hypothetical SME:
Company X currently sends out monthly invoices and statements through the post to 4 500 customers. It places both documents into one envelope, and sends via normal postal services. The billing process costs, on average, R3.80 per envelope (taking into account: stationery, printing, sorting, insertion and postage). R3.80 is just the hard cost of sending one bill. Company X knows that in addition to this cost, there are other costs such as the salaries of resources engaged in tracking lost envelopes, re-issuing statements, dealing with returned envelopes, and so on.
At its most basic, the business case for converting customers to e-billing is a direct cost reduction on the price tag associated with getting a bill sent to a customer. If e-billing costs R1 per e-mailed bill, compared with R3.80 per posted bill, then the benefit is obvious. The question that remains is what level of adoption does Company X need to achieve to make the effort of setting up an e-billing option viable?
If Company X could save R2.80 per bill and manages to convert 25% of its customers, the monthly saving is R3 150. If Company X managed to convert 50% of its customers, it would save R6 300 per month.
If the total cost of setting up e-billing for this SME was R18 500, the investment would be paid back in month three of running at 50% adoption. And this is not taking into account the savings on softer costs such as freed-up resources and other efficiencies.
If that is extrapolated to a hypothetical large business - the numbers become unbelievably enticing:
The least a business should do is to put together its own figures to assess the benefit of e-billing to the bottom line.
Alison Treadaway, MD of Striata
Company Y has 4 200 000 customers on its books. It sends each customer a paper invoice once a month, which costs R1.98 per bill. It has 2 100 000 e-mail addresses on record and plans to convert between 10% and 35% of customers with e-mail addresses to e-billing. At these volumes, the cost per e-mailed bill is estimated to be 82c.
Ignoring all soft costs such as human resources and improved efficiencies, Company Y is saving R1.16 per bill that gets converted to e-mail. Based on converting 10% of its e-mail addresses, the company would save R243 600 per month. At 20% of customers with e-mail addresses, the monthly saving goes up to R487 200.
At its target of 35% of e-mail addresses, the monthly saving is R852 600.
Let`s say the e-billing project setup is a total project of R500 000 (including new infrastructure, hardware and software), then even at the lowest level of only 10% adoption, the setup cost would be paid back in two months.
Now that`s a healthy ROI. Imagine what this business would save if it managed to convert a full 50% of its total customer base of 4.2 million? Millions of rand could be redirected elsewhere into growing and improving the business.
Clearly, this is a simplistic way of calculating the monthly saving, and it is based on a number of fabricated figures. But with rough numbers as attractive as this, the least a business should do is to put together its own figures to assess the benefit of e-billing to the bottom line.
The primary factor in making a financial success of e-billing is related to adoption. A successful e-billing project will not only address the requirements to the setting up of the e-billing channel, but also outline the plan to convert as many customers as possible.
Remember, the financial benefit for e-billing doesn`t work only for companies with lots of customers which are typically business-to-consumer focused. It also works for B2B companies that have a small client base, but where the amount of information in each bill is huge.
A final scenario illustrates this point: Company Z bills 1 600 customers each month. These customers get on average 40-50 invoices each. Company Z has to use over-size envelopes and pay more for postage because of the package size. The average cost per bill is R5.80 including 40 pages, a large envelope, plus extra postage. The e-mail bill is also more expensive than usual, because the file size will be high. Even if the e-bill costs R3.20, Company Z is still saving R2.60 per bill.
Because these are business recipients, they are more likely to have e-mail addresses and accept e-billing, pushing the possible adoption rate higher than expected in the consumer environment. If Company Z converts 60% of customers to e-billing, the monthly saving is R2 496. If it manages to convert 85%, the saving is R3 536. If the e-bill setup costs are R21 000, the investment will be paid back in six to eight months. Thereafter, Company Z could be saving over R42 000 per annum.
In my opinion, these kinds of numbers should be able to get e-billing onto the board agenda of any size business.
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