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payment:b2b_options:electronic_billing_presentment_and_payment
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Electronic Bill Presentment and Payment

Electronic Bill Presentment and Payment (EBPP) is a form of paperless, electronic billing and payment. The technology is per definition for internet based bill presentation and paying between companies and consumers (B2C) and between companies and companies (B2B). In Europe the term EBPP is used since 1996.1)

General information about electronic invoices

Electronic business transactions within and between companies are almost as old as the use of information technology itself. Nevertheless there are still big inefficiencies. Only a few companies use internet technology to handle entire business processes, and most of electronically initiated transactions (f. e. webshops) are still not electronically processed and settled. Further action is necessary between the interface of trade and financial logistics. Both areas are largely isolated from each other and companies use different solutions.

All companywide financial transactions are part of the financial supply chain. It describes all the activities of the qualification of potential business partners on the financing, pricing and hedging of the transaction to create and send out the invoices, review and possible complaints. The financial process ends with the receipt of payment. The eelectronic invoicing, with a focus on automization and optimization of the bill management is a major component within the financial supply chain and also describes the interface for electronic order processing in e-commerce.2)

That the invoice in the B2B process is still today mostly full of inefficiencies was a long time the result of the lack of legal frameworks across Europe. The bill is a core element of European tax system for companies for pre-tax allowance. Since 01.01.2002 electronic invoices are equivalent to invoices in paper form. Today the electronic bill also allows companies the deduction of input taxes. However, it is necessary to meet some technical preconditions to send notarial conform electronic invoices.

Regulatory Framework

Since 01.01.2004, the European Directive 2001/115/EC3) is implemented in Germany and allows electronic invoices. To the tax deduction allowed is the qualified electronic signature provided form a certification service provider (§ 14 para 3 UStG). So if a company wants to make sure that their electronic invoices of commercial customers in particular are not challenged, they must meet this criterion. In addition to building their own signature systems, companies can also operate interfaces to external signature solutions. Otherwise, the connection behaves in B2C, because consumers can not make a valid tax deduction. In all european countries the requirements for tax complient electronic invoices are differnet and Germany together with some other countries has the hardest legal restrictions. The european law provides three kinds of electronic signatures, each with different juridical value.

Invocing models

For the Internet-based invoicing process, different models have been established. The difference between the models is the relationship between billers, service providers and customers. Basically there are direct and indirect models, which are described below. In addition a consolidator model is possible.

Biller-Direct-Model

In the so-called biller-direct-model, the invoicing party presents all invoices on the company's own web pages and use the direct contact to its customers.4) Between the invoicing party and the bill recipients exists a one-to-many relationship. With full EBPP process integration, the customer can initiate the payment of the bill direct on the website of the invoicing party. To use the services a customer can be register once on the website and receives a user ID and password to get access to the secure server of the invoicing party.5)

Benefits of this model:

  • All customer profiles are on the systems of the biller
  • Changes could be done very easy (for example changing the layout of an invoice)

Buyer-Direct-Model

The counterpart to the biller-direct model is the buyer-direct model. Here is one payer connectet with several invoicing parties in a one-to-many relationship. Incoming invoices are collected on a web page of the customer (payer) or aggregated. In this model reflects a strong market position of the buyer. Especially for companies with high volume of invoices received by an EIPP solution can handle bills much simpler.6)

Benefits of this model:

  • Flexible import interface for the buyer
  • Flexible finacial reporting options for the buyer

Consolidator-Model

The disadvantages of direct solutions are solved in indirect models, so-called consolidator models resolved through the intervention of intermediaries. Two concepts for such an indirect prossess has to be distinguished: On the one hand, the biller can use an external service providers to send the bills on his behalf. This concept is already used for paper-based invoice processes (a service such as offered by printing companies)(BSP). On the other hand, a (potential) recipient of bills can use a service provider to manage the bills of different billers for him (CSP). Here we talk about bill consolidation and describes the service as a consolidator. In this context it should be mentioned that most invoicing service providers are more general and offer both bill consolidation and bill outsourcing services. This describes a consolidator model which connects biller and customers (payers) in a many-to-many relationship.7)

Benefits of this model:

  • Less costs for implementation and support
  • Buyers can receive consolidated invoices from different suppliers

Parties involved

As with the paper-based invoices, many companies use for the execution of electronic invoices external service providers. There are serveral different rolls in the market, which are determined by the requirements of the participating business-operation partners and their processes. The offering consists of the following services in B2B:

Biller

The Biller prepares, as already lawfully on the paper-based invoices, the invoice data and transmits the bill. It determines the possible payment methods and monitors the receipt of payment. The invoice and a receipt for the payment book will be archived at the end.

Biller Service Provider (BSP)

The biller service provider offers electronic invoicing services related to invoicing parties. The services could be data conversion to the formats required by the customers, the lawful and safe transmission of data or archiving services.8) The BSP itself is connected to a consolidator. Under certain circumstances, the role of the BSP could also involve a separation of data into online and off-invoices (paper) and paper-based delivery for non-electronic-shippable invoices. The suppliers are unsually companies from the print and letter shop business. In addition, the BSP often offers some advanced services, such as presentation of invoice details on the web.

Consolidator

The consolidator is the central hub between billers and bill recipients (payer). Incoming invoices of all connected biller service provider will be sorted and forwarded to the appropriate customer service provider to deliver the bill to a recipient. The presentation of invoice details in the original layout and additional sales and marketing material is done by the BSP or the biller itself.

Customer Service Provider (CSP)

The customer service provider is the service provider for the invoice recipient. He is also connected to a consolidator and receives the consolidated invoices for all its customers. The services include the processing of incoming invoice data and the subsequent presentation in a Web portal or the transfer of structured data for automatic data transfer into ERP system's of the recipient. The provider may also offer opportunities for direct payment (EIPP service), and regulatory compliant archiving services.

Payer (Customer)

The recipient receives the invoice and assigns them to the appropriate order or service. To fulfill his part of the contract the recipient triggers the payment of the invvoice. Then the invoice will also be archived.

eInvoicing, eBilling, Internet Bill Presentment or Electronic Bill Presentment, there are a lot of terms and definitions around the electronic exchange of invoices. Furthermore since 1960 Electonic Data Interchange EDI is common to exchange business data especially in bigger companies.

1) , 8)
Tanner C., Koch B.: Die elektronische Rechnungsabwicklung in der Schweiz. In: Schubert P., Wölfle R., Dettling W. (publisher): E-Business mit betriebswirtschaftlicher Standardsoftware: Einsatz von Business Software in der Praxis. München, Wien: Hanser Verlag, 2004, 157-168. Print.
2)
Pfaff D., Skiera B., Weiss J.: Financial Supply Chain Management. Bonn: Galileo Press, 2004. Print.
4)
Dannenberg M., Ulrich A.: E-Payment und E-Billing: Elektronische Bezahlsysteme für Mobilfunk und Internet. Wiesbaden: Gabler, 2004. Print.
5) , 6) , 7)
Domroese M.: Wertschöpfung der Rechnungsstellung. Frankfurt: Without publishing, 2002. Print.
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payment/b2b_options/electronic_billing_presentment_and_payment.txt · Last modified: 2012/01/03 07:30 (external edit)