EIPP's expanding global capabilities: electronic invoice presentment and payment (EIPP) hasn't yet had the impact that some have predicted, but new technologies and programs may make a compelling case for it.

• Author: Mandler, Maria
• Position: Payment system

The benefits of electronic invoice presentment and payment (EIPP) have been well documented, and early adopters have achieved significant reductions in days sales outstanding (DSO)--largely due to a more efficient dispute resolution process. Why, then, have corporations around the globe been so slow to adopt EIPP?

Some of the adoption challenges are local and fall into the "general market un-readiness" category that involves bandwidth issues, low Internet usage, low PC penetration, laws requiring the use of paper invoices and even low labor costs, which undercut the value proposition of automating manual processes. It's not surprising that EIPP adoption rates would be low in less developed regions. But why have adoption rates failed to meet industry analysts' expectations in Europe and North America as well?

In Europe, the use of direct debits is common, but in the U.S., the national fondness for paying by check--in order to take advantage of mail float--may have contributed to low EIPP adoption rates. However, recent research suggests that paying by check has peaked in the U.S. and the use of ACH debits--as well as EIPP--is growing. In addition, EIPP platforms are accommodating check payments, providing users the time they need to fully migrate to electronic debits.

It's possible that industry expectations regarding EIPP adoption, formulated at the height of the dotcom bubble and before the economic environment became more challenging, were simply unrealistic. A 2003 GTNews Working Capital Survey reveals that 25 percent of respondents that did not proceed with an EIPP program cited "limited budget and lack of internal sponsorship" as the main reason. It's worth noting that 61 percent of respondents who had not yet embraced EIPP expected to reconsider doing so within the next 12 months.

With collection issues creating serious inefficiencies and working capital management challenges for corporations worldwide, the need for EIPP remains crystal clear. In some regions, such as Latin America, working capital issues are so serious that companies need funding and credit on a daily basis to build and deliver goods, and sales representatives can spend more time disputing invoices with customers rather than selling to them.

DSO averages vary widely from region to region and within regions. For example, in Greece, the average DSO is 80 to 90 days, while in Finland, the average is only 10 to 15 days. Billing and collection methods--as well as payment...