Hassle-Free Electronic Invoicing: Now That's Hot
HVACR wholesaler heats up efficiency with a cool electronic invoicing system.
Whether your company brings in products from suppliers or ships them to customers, at some point an invoice changes hands.
And if your company's invoices change hands literally - stuffed into envelopes, dropped in the mail, and removed at the other end - many technology firms stand ready to relieve your paper-handling burden.
Companies that want to import electronic invoices directly into their enterprise resource planning (ERP) systems can utilize relatively simple technical solutions, says Shan Haq, director of product management at Transcepta, an electronic invoicing provider in Aliso Viejo, Calif.
The hard part is persuading more than a few vendors to send digital bills.
"If a company aims to receive 90 percent of its inbound invoices electronically, it must penetrate its supplier list," says Haq.
Convincing any but the largest suppliers to get on board with electronic invoicing, though, can be a major challenge.
"Small companies often don't see the benefit of investing in electronic invoicing solutions. Nor do they have the resources to do so," notes Haq.
Getting those small vendors to join the game is a major thrust behind Transcepta's Electronic Invoicing Community, a network of buyers and sellers that use Transcepta as a hub for billing transactions.
Although it markets this trading network to both buyers and sellers, to gain the critical mass necessary to benefit both communities, Transcepta places special emphasis on the supply side. Its strategy: make the technology simple and attractive for vendors to install and use.
Take IT Easy
"My experience with IT is that nothing is ever easy. But Transcepta proved an exception," says Kathy Kalmbach, owner of four Johnstone Supply heating, ventilation, air conditioning, and refrigeration (HVACR) wholesale outlets in California's Central Valley.
Kalmbach's stores in Fresno, Salinas, Merced, and Visalia, are part of Johnstone Supply, a 300-store cooperative. As a "cooperative franchise," her business operates the stores under the Johnstone name, and purchases most of its inventory from the co-op, but Kalmbach owns and runs her business independently.
Kalmbach started working with Transcepta not to accommodate a large customer, but to make her own operation more efficient. That desire gained special urgency this year as the business expanded from two stores to four.
"We hope the main store can continue to provide support functions for the two new stores, and my goal is to accomplish that with as few hires as possible," Kalmbach says.
She originally considered developing electronic invoicing capability in-house. "But I never tackled that project because it involved software enhancements I didn't have time to undertake," she says.
Instead, Kalmbach began using Transcepta's Electronic Invoicing Community in March 2007. It was worth a try because the relationship came with no strings. "It did not involve a contract and I did not have to pay any up-front fees," she explains.
EDI Not for Everyone
Transcepta designed its Electronic Invoicing Community for buyers and sellers such as Johnstone Supply that can't benefit from either electronic data interchange (EDI) or Web-based invoicing systems.
For large trading partners, EDI offers a viable way to exchange invoices. But many companies find that technology too difficult and expensive.
Some buyers use e-invoicing solutions to establish online portals where small suppliers submit invoices. That's fine for vendors that send out only a few invoices per month. But for companies sending hundreds or thousands of invoices, it is not practical to key all those billing details into a Web page, Haq says.
On the buyer side of its Electronic Invoicing Community, Transcepta often works with one of several third-party firms that sell accounts payable workflow software. That partner determines which data format the buyer's ERP system needs, and decides which electronic transmission method Transcepta should use to deliver that data.
Sealing the Deal
Once the format is settled, Transcepta begins signing the buyer's suppliers onto the network—a sales effort on its part. One incentive Transcepta employs to seal the deal is to make implementation as painless as possible.
"Our technology allows us to install vendors over the phone and over the Web," Haq says. "We don't have to go on-site and install software; we typically have vendors up and running in about one hour."
Vendors agreeing to use the service simply download a driver for what Transcepta calls a "virtual printer" and use it to transmit a sample invoice. Transcepta then configures an electronic version of that invoice, which provides the information it needs to deliver invoices electronically to the buyer—in whatever format the buyer specifies—via file transfer protocol or another transmission method.
To bill the customer, vendors use their regular software - a sophisticated ERP system or simple Quickbooks, Excel, or Word files - to produce invoices just as they always have. But instead of sending those invoices to a physical printer, vendors select the virtual printer to send them to Transcepta.
Besides making the process easy for vendors, Transcepta sweetens the pot by offering value-added services. For example, although Transcepta might first approach a vendor on behalf of one of its major customers, that vendor might want to automate the invoicing process for other customers as well.
Some of its customers likely cannot receive invoices via direct electronic transmission. But they might be happy to receive them via e-mail or fax, while others continue to insist on postal delivery. For the vendor, keeping those preferences straight could entail a good deal of work.
Transcepta helps vendors avoid that confusion. Vendors hit "print" and transmit their entire invoice stream to Transcepta. It then determines which buyers should receive their invoices via direct electronic transmission, e-mail, fax, or postal services. It uses a mailing house to deliver paper copies.
Getting Their Feet Wet
Many vendors get their feet wet with the service by outsourcing to Transcepta the delivery of hard-copy invoices. That service first attracted Kalmbach and her Johnstone Supply stores. Soon, though, Transcepta started to approach Johnstone's customers about converting invoice transmission to e-mail or fax.
Kalmbach sent her first invoices through Transcepta at the end of March, and soon after, Transcepta started the campaign to wean customers from postal delivery. The company worked with Kalmbach to switch almost 50 percent of its customers from post to either e-mail or fax transmission, in fewer than 30 days, she notes.
Kalmbach pays 29 cents for each invoice sent electronically or via e-mail. Transcepta's charge for sending invoices by fax or postal mail varies, depending on volume.
"Our pricing is less expensive than a stamp considering the effective transactional price," Haq contends.
Buyers that use Transcepta to import invoices into their ERP systems can choose from several pricing models. Some license the software; some pay in advance for a certain number of inbound invoices; some pay as they go based on transaction volume.
Implementation for those buyers is more complex than for their suppliers. "If a company uses a workflow system and it merely wants to transact invoices electronically, implementation can be relatively quick," Haq says.
But if the company needs to implement workflow functionality as well, the project can take many months, he adds.
Converting her customers from postal to e-mail or fax invoice transmission helped Kalmbach cut costs, because Transcepta charges less for those two methods than for postal delivery.
In addition, outsourcing the invoice delivery process freed up two employees who previously spent a full day each month dealing with statements, Kalmbach notes. Those employees now can spend time making sales, rather than stuffing envelopes.
Because her company no longer mails invoices, Kalmbach plans to toss her $200-a-month postage meter when it reaches the end of its lease. "I'm replacing it with a $20-a-month machine," she notes.
For customers using the e-mail or fax options, who want to be billed more than once each month, the four-store business can now send invoices every morning. "I expect this to shorten our payment cycle," Kalmbach says.
In the future, her customers will also be able to use Transcepta's Web site to pay invoices under an automated clearinghouse service.
With all the effort Transcepta has poured into automating the payment side of the buyer-seller transaction, it is possible that the company will one day apply its expertise to taking paper out of other supply chain transactions, such as purchase orders.
"Right now, however, Transcepta is laser-focused on perfecting invoicing," Haq says.