The Check is in the E-Mail

by David Schloss

Sitting in front of an accounting package with the company checkbook, a pen, envelopes, a pile of bills, and a book of stamps is a ritual repeated countless times in the life of a business. Checks can languish in the mail resulting in late charges or ruined credit. Even small errors in transferring information to the register can result in hours of additional work when it comes time to reconcile accounts.

This task may be unavoidable, but fortunately it can be simplified with automation. Electronic billing and payment services (EBP) ­ Internet-based services that allow businesses to make and track payments with the click of the mouse ­ can significantly reduce the hassle associated with accounts payable, while reducing costs and integrating seamlessly with accounting software. Viable online bill payment and presentment services are now available to businesses of all shapes and sizes.

Traditional VS. Electronic
Everyone is familiar with the traditional model for bill payment. Company A sends a statement to Company B, who writes out a check, stuffs it in a stamped envelope, and drops it in the mail to be sent back to Company A. When the payment finally arrives three days later, Company A fills out a deposit slip, takes that check to its bank, and waits several days for the funds to clear.

Electronic billing and payment works to simplify the process, removing the most cumbersome and time consuming steps. Using EBP, Company A sends their statement ­ in some cases in the form of an e-mail ­ and Company B goes on line and instructs its financial institution or service to pay the bill. If the recipient of the funds can be paid electronically, the funds are automatically debited from one account and deposited into the other. If not, the service cuts a check and sends the payment traditionally. Transactions processed electronically can be downloaded into the company’s accounting software for reconciliation.

Richard Gormley, president of Rogo Inc. in West Chester, Pa., finally got tired of the cat-and-mouse game of traditional bill payment. After six years as his company’s defacto bookkeeper, he switched to EBP last quarter. Rogo Inc., which specializes in locating and placing physicians and specialists at private practices, HMOs, and hospitals, has long been a user of QuickBooks for its accounting processes, but Gormley only switched to online billing and payment when the QuickBooks coordinated with his financial institution.

“We had tried [earlier] to switch to online banking with my bank, but it was clear they were not ready to handle our needs,” recalls Gormley. “Once QuickBooks’ most recent version came out, it was a lot easier to get set up since [the software] works with the bank. It is very easy to use.”

In less than an hour, Gormley set up a system to perform recurring bill payment. To test it, he started with only four or five bills handled directly through QuickBooks, but he has been gradually adding more payments.

“I started fairly slowly, but I’m sure by the end of next month we’ll be processing all monthly payments, and then we plan to incorporate all remaining invoices,” he says. “It’s something we definitely want to do, because information goes directly into our system and we can track expenses much more cleanly.”

The interface provided by the accounting software makes bill payment simple. Account information and payment address are entered, and recurring payments are scheduled on screen. Once payment is scheduled, the bank or processing company takes over. Larger companies such as utilities, telcos, and credit card companies are set up to handle electronic funds transfers which occur almost immediately. But a company not set up to handle direct depositing of funds requires a physical document sent from the bank, and several days should be allowed for postal delivery.

How It’s Done
It’s not as if businesses have not before been able to manage billing and payment through accounting software. And, it’s not as if financial institutions have just started offering online banking options. But it is only recently that they have gotten together with services such as CheckFree to coordinate the efforts. And now, businesses can link accounts from as many as 10 different banks and go on line to pay bills, schedule payments as far as six months in advance, transfer funds, and access accurate account-balance and transaction-pending information. Depending on the bank, it may also be possible to provide online bill presentation (or e-billing), whereby billers can send electronic copies of statements to customers through a Web interface, allowing payments to be made on the spot.

The advantage of the Web-based interface is that it can be accessed worldwide, allowing for real-time operations management from anywhere with an Internet connection. And the integration of EBP provided by accounting packages such as QuickBooks and Microsoft Money is particularly useful. Both recurring transactions and single-pay bills can be handled and instantly reconciled with the company’s books.

Setup for electronic billing and payment varies, depending on the method of access and on the financial institution. Most banks provide some sort of online access, as do nearly all of the commercial institutions. Businesses that wish to pay bills through a company’s online system should check for bank-accounting package integration, and will need to enroll through the bank’s branch, Web site, or through its phone support network.

QuickBooks Pro 2000 lists more than sixty banks that integrate online services with the package. Many of the banks providing EBP and e-bill services do so through major national providers such as CheckFree, which allows access to e-bills and EBP through financial packages, portals, and bank Web sites.

Enrollment for EBP can be done through the accounting software or through the financial institution, but in both cases, it’s simply a matter of printing out a form and mailing it in with a voided check. Once the information reaches the bank or service, processing takes a matter of days. The customer will be issued a login name and a password, and they’ll be up and running. With some accounting software packages, this process can even be initiated on line.

Banking On Savings
Businesses that enroll in EBP find that the savings come not from the cost of stamps ­ the average $10 to $20 per month service fee makes up for that ­ but from the hours that can be refocused on productivity. “I used to have to go to a bank every month to deposit our taxes and payroll,” says Gormley. “Just by paying bills on line I save a few hours a month, if not significantly more. I would have needed to go to the bank today, but I already paid the tax bill last night.”

Gormley also finds that he can use the accounting software’s powerful features to analyze the bills and to pinpoint areas that need to be addressed, and thinks that the EBP integration with his accounting package will provide the greatest savings.

“I can tell you where it’s helped me tremendously: setting up and analyzing our budgets, strengthening our ability to better track expenses, and being able to pull vital information out much more easily,” he says. “It has helped me identify areas where we were spending too much.”

“I don’t know if it’s made us more profitable yet,” he adds, “but I think it’s going to.”

It’s not often that a business process can be simplified with so few downsides. Electronic billing and payment eliminates hassles and headaches while providing increased management of information. With so many ways to integrate online billing systems, a business can easily address its payables in an interactive fashion. And that’s money in the bank.

Small Business Computing Staff
Small Business Computing Staff
Small Business Computing addresses the technology needs of small businesses, which are defined as businesses with fewer than 500 employees and/or less than $7 million in annual sales.

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