The executives at payments and FinTech firm Jack Henry & Associates (JHA) know that offering banks and its corporate clients the ability to accept electronic payments online is nothing new. Speaking with PYMNTS, JHA Payment Solutions Group General Manager Greg Adelson described the market for electronic billing and acceptance solutions as "saturated."
So, why has the company developed its own solution, Biller Direct, in this field?
"We're not trying to reinvent the market," Adelson explained. "We're trying to capture a market we think is underserved."
That market is the small and medium-sized business crowd, billing their consumer and corporate clients manually and often receiving paper checks. In B2B payments, the paper check is an especially persistent problem that can yield inefficiencies both on the accounts payable and accounts receivable ends.
According to data from PaySimple, it costs businesses an average of $1.22 to process a single paper check. Meanwhile, in B2B payments, the use of the paper check is actually on the rise within the accounts payable department.
JHA's Adelson said one of the biggest challenges for SMEs when it comes to accounts receivable is the cost they can incur by not offering an electronic bill pay option. But it's also about streamlining the accounts receivable process for companies with limited resources, he said, even if companies need to bill through multiple channels. That, Adelson noted, is another massive obstacle for SMEs that don't always have the right banking and FinServ relationships to manage accounts receivable across platforms, both online and off.
But automation in accounts receivable — including invoice generation and payment acceptance — is key to cost management, research says. Earlier this year, VersaPay examined the ROI of accounts receivable technology and found that 90 percent of the costs associated with manual invoice processing is directly linked to labor. The cost of preparing an invoice to send out to a client can be as high as $11.50 per document, VersaPay added, citing the 2016 APQC report.
Separate research from Corcentric and the Institute of Finance & Management found manual processes to be among the top challenges for the accounts receivable department, especially when vendors sell across channels. Paper checks, invoices, spreadsheets and manual data entry all lead to late bill payments for the client and a dent in cash flow for billers.
Adelson said that the challenges of offline billing have been "going on for a while" and have yet to be addressed in the SME segment. "The market is fairly saturated at the large level," the executive said of electronic invoicing and billing solutions. But not in the SME space. "Most of those clients of our partner institutions are not getting any attention for this type of product by any means," Adelson noted.
Removing the friction in accounts receivable, he said, can help to nix those pesky paper checks that are so expensive to process.
"If we're able to facilitate a solution that they didn't have today, it will eliminate, or at least minimize, the number of checks they receive," said Adelson. That means faster payments for billers and more up-to-date bookkeeping for payers, too.
JHA's Biller Direct tool is offered to financial instructions to offer to their own corporate clients, the firm said in its announcement of the solution last week. Not only is the prominence of the paper check a challenge for SMEs — often considered underserved by large financial institutions — but the nature of billing is also taking a new shape: recurring billing. The business model could present a whole new world of logistical challenges for businesses, as well as the banks that service them, when it comes to billing.
With SMEs already facing slim margins and a struggle to get the most from their financial service providers, the demand for cost-effective and efficient billing solutions is pressing. Adelson explained that JHA is looking to capture some of that SME market as the struggles of manual and paper-rich billing and AR procedures plague smaller companies
"This isn't something new," he said. "But it's newer to that size market — they haven't really had that opportunity."