How many bills do you receive at home every month? Quite a few, I imagine.
And I'd venture to say that paying those bills does not rank among your
favorite activities - not just because paying bills eats into your savings,
but also because of the drudgery of dealing with them. They pile up on
your desk. You can't always be sure what every line item represents. When
you finally find time to call the customer assistance number, you don't
always get the answers you need. There may even be the additional issue
of which payment method you should use.
Extrapolate this to the corporate level,
where analysts estimate that in the United States alone, 12 billion invoices
were issued over the past year. Worldwide, the number approaches 48 billion.
Within the corporate world, drudgery and inefficiencies prevail as well.
Accounts Payable departments spend an inordinate amount of time resolving
disputes and processing invoices and payments. Without integrated systems,
invoice information is rekeyed into the accounting system, which can lead
to errors. Disputes can't be handled online, and reconciliation requires
many manual - and often cumbersome - steps. The collections process is
also not fully integrated with accounting data, and adds further inefficiencies
to the system.
Now consider business-to-business processes:
while a company's business partners browse through digital catalogs and
use special procurement solutions for purchasing goods, the company itself
is issuing invoices, in 90 percent of all cases, just as it always has
- by post - and then, in most cases, payment is made electronically! The
result is a disjointed approach that can be a barrier to e-commerce. The
efficiency of closed, integrated process chains continues to be the exception
rather than the rule.
Electronic Bill Presentment and Payment
(EBPP), hailed by analysts as the "killer application of the Internet,"
offers the remedy. EBPP truly optimizes invoicing and payment processes
and eliminates many of these manual processes, curtailing the cost of
issuing invoices. Market researchers Ovum have concluded that costs can
be reduced by up to 70 percent through EBPP.
SAP is incorporating this "killer
app" into mySAP Financials as part of the SAP Financial Supply Chain
initiative. Not only can EBPP reduce costs and increase efficiency, but
it gives companies yet another tool for building relationships with customers
and business partners.
Streamlined, Less Costly Invoicing and Payment Processes
The conventional dispatch of invoices entails numerous steps by both
the issuer and the receiver - from printing the invoice and dispatching
it via post, to collection, reconciliation, and closing. It has been estimated
that each invoice sent by post can cost up to $15 US. Now, instead of
printing an invoice, stuffing it into an envelope, and mailing it, the
invoicing party can send an electronic invoice. Savings can accrue into
Currently there are two basic models for
- Direct Biller: The issuer sends an electronic invoice directly
to the party responsible for payment. This is the preferred model for
large billers (those companies that generate a minimum of 1 million
invoices per year), for companies that want to control data access,
and those that want to maintain a close relationship with their customers.
- Consolidator: A bank or specialized service provider collects
the invoices of various companies and presents them in a consolidated
fashion on a web site or portal. This consolidated approach is ideally
suited for companies that want to avoid implementation efforts and prefer
a hosted solution.
An invoice can be dispatched either directly,
as an e-mail attachment sent to the customer, or indirectly, as a hyperlink
that redirects the customer to the biller's or consolidator's web page.
From there, the customer can access the SAP system of the biller or consolidator
(see Figure 1). Whichever approach is used, payment is made electronically
- for instance, by debiting a credit card or by direct debit. Of course,
payment methods can vary from company to company.
||EBPP Displays Both Open Items and Credits
Cost Savings - Just One Part of the Benefits Picture
Cost savings, while profound, are only a small part of the overall benefits
picture. Companies that have implemented EBPP also regard it as an essential
element of their e-business activities.
For example, EBPP is increasingly being
used to cultivate a more intensive relationship with customers, with a
view to cross-selling. Many companies, such as insurance companies and
utilities, only communicate with their customers once a year - when they
send an invoice. What could be more natural than to use this document
as a marketing tool at the same time? As a result, the future of EBPP
will mainly be in the business-to-consumer (B2C) area, as "the bill
becomes the portal," with individual and personalized web sites designed
to offer the customer better value.
However, you can lock into similar benefits on the business-to-business
(B2B) side. With clear audit trails, disputes can be resolved faster and
days sales outstanding (DSO) can often be reduced. The exchange of information
between two business partners can be simplified, enabling company-wide
financial processes to be carried out with greater efficiency.1 EBPP enables
the exchange of information on the financial process regarding invoices,
payments, and master data. Traditionally, such information is exchanged
in written form (by letter, fax, etc.) or by telephone. These time-intensive
forms of communication can be simplified significantly.
Financial Supply Chain Initiative Supports EBPP in B2C and B2B Environments
The new EBPP solution from SAP is suitable for both the B2C and B2B environments,
and will provide support for both the direct biller and consolidator models.
From a business perspective, the focus is not just on electronic billing
and payment, but on other aspects of the overall financial supply chain.
According to the research institute Killen
& Associates, a financial supply chain "parallels the physical
or materials supply chain, and represents all transaction activities related
to the flow of cash, from the customer's initial order through reconciliation
and payment to the seller." Optimizing this financial supply chain
is becoming the key differentiator for many companies in a networked and
SAP's Financial Supply Chain Management
initiative contains EBPP, dispute management, and credit management, which
will help companies reduce their working capital and float, improve billing
and payment processes, and create more accurate cash management forecasts.
To facilitate this, the business partners involved have the option of
viewing their account balance and consequently their overall position
with regard to their suppliers. In this way, the customer can see any
possible credits along with any open items, and can offset these with
the receivables that are still open.
SAP's groundbreaking approach to EBPP ensures
high performance and scalability (see Figure 2). The entire presentation
logic of the SAP EBPP frontend is being implemented using Java Server
Pages (JSP), while the larger part of the business logic remains in the
SAP backend system. Communication between Java and ABAP Objects is secured
by the SAP Java Connector (JCo).2 This enables
both inbound and outbound calls making use of the RFC (Remote Function
Call) protocol, and is also intended to support SOAP, the Simple Objects
||SAP EBPP Architecture Based on Java Technologies
The traditional modules for accounts receivable
accounting (FI-AR - Accounts Receivable) and contract accounts receivable
and payable (FI-CA - Contracts Accounts) are included as SAP backend systems.
FI-CA, for example, is used with several SAP industry solutions for insurance
companies, the telecommunications sector, the public sector, and utilities.
It is precisely these business areas that are already keen to implement
The new EBPP product also provides interfaces
to industry business solutions and billing creation systems (for instance,
the SD Sales and Distribution component or CRM Billing). This ensures
that users can drill down from the overview of open items to view detailed
The first release of SAP's EBPP functionality
in October 2001 covers all the functions of the core processes of the
direct biller model; from the point of view of the invoice issuer, credit
card payments and direct debit are supported as payment methods. Future
releases will extend the focus to cover the consolidator model and dispute
SAP's EBPP solution can deliver huge cost savings and a better means
for communicating with your business partners and customers. If you make
EBPP part of your accounting processes, while also incorporating it into
your Customer Relationship Management strategy, you can achieve financial
savings, benefit from a unique differentiator in your
e-business offerings, and truly empower your customers.
Jürgen Weiss studied
Business Economics at the University of Heidelberg. He joined SAP in 1997
as a partner manager in the Complementary Software Program and as also
worked as a consultant for IBU Insurance. Since 2000, he has been the
Product Manager for EBPP in SAP's Financials GBU.
In B2B scenarios, it is quite common for business partners to need more
information before they can close a business transaction. For example,
when the vendor cannot tell which payments relate to which invoices, the
vendor's accounts receivable accountant then has to contact the customer's
accounts payable accountant by telephone, letter, or fax to obtain further
details. Only then can they close the transaction and post it. With EBPP,
the vendor only needs to send the customer an e-mail requesting more payment
For more information on JCo, see the article by Thomas G. Schuessler in
this issue of SAP Insider, and online at www.SAPinsider.com.