Six and half years ago I started blogging with my first post entitled "Does the world really need another blog?" Today's post is about a new Pay Anyone service that Billtrust launched last week that I think will be a game changer for us. What exactly is a Pay Anyone service? Well pull up a chair and I'll explain more about the fascinating world of bill payments (this is the point in the story where my kids start fake snoring and exit the room).
These days, most people pay their bills online. I didn't say all, but most. There are two primary ways that this happens. The first is called the Biller Direct model which simply means you go directly to your biller's website to pay your bill. Think AT&T, American Express, Con Edison, etc. The second method is called the Consolidator model. In this model, you go to a bank's web site where you can pay ALL of your bills. Most people like the Consolidator Model better because it's more convenient than logging into multiple different Biller Direct sites.
When these consolidator sites started popping up in the 90's, it quickly became apparent that most consumers didn't want to pay some of their bills via the web and some via paper check, they wanted to do them all the same way. Unfortunately, there was no way then, and there is no way now, to pay everyone via an electronic payment. In order to make a payment electronically, you need the electronic address of the recipient, which is typically a bank routing and account number. There is no universal database that lists all these electronic addresses of every landscaper, phone company, dry cleaner, water utility, etc.
So someone, probably CheckFree, had the brilliant idea to fake it. They made it look to the consumer that all payments were being made electronically but on the back end, paper checks would be issued to those recipients that couldn't be paid electronically. Back in the 90's, roughly 25% of the payments were electronic and 75% were via paper check. Now that is reversed with 75% of payments electronic. This approach has worked well and there have been several businesses that have followed that model. Most recently Check did this in the Mobile world. They were so successful they were acquired by Intuit.
OK, lecture over. Now the news.
These Pay Anyone services have worked well with consumers but what about businesses? This is where Billtrust comes in. A couple of years ago we launched a consolidator site called Invoice Central that allows businesses to view and pay bills from other businesses. We launched with around 20 different billers and have steadily grown to over 100 billers and tens of thousands of small businesses. The problem we predicted, much like what played out on the consumer side, is that once you convince a business to pay some of their bills at your site, they then want to pay all of their bills. So last week we launched Pay Anyone as part of Invoice Central to a small subset of our customers.
That is sort of interesting. But does the world really need another Pay Anyone service?
We think so because ours is different. Significantly different. Like why didn't I think of this sooner kind of different?
Our Pay Anyone service gives small businesses the ability to extend the vendors they can pay in one secure site. Best of all, it is free to the small businesses as it is funded by the vendors (the ones issuing the bills to be paid). Why would vendors fund this? Simple, electronic payments AND electronic remittance are fundamental to streamlining their business.
If you think paying everyone electronically is hard, try figuring out how to deliver clean electronic remittance to everybody. Electronic remittances are instructions that tell a business how to post a payment - here's my payment for $12,513 that pays these 14 outstanding invoices with these various amounts. This remittance information must be delivered to businesses in format that is easily digestible in their accounts receivable system or it is a big problem. What we in the business call "payment exceptions". The dirty secret in B2B payments is that electronic payments are actually more costly to handle than paper payments because they rarely come with good electronic remittance data and are therefore exceptions.
And that's the big news. But wait, that's not all.
We're doing the old CheckFree trick of sending paper checks to those businesses that we don't have electronic addresses for, but our marketing team had a cool idea. Why not also print a nice big marketing message on the check stubs that says something like "Tired of receiving all these paper checks, contact Invoice Central and get paid faster electronically".
So to answer the question posed earlier. Yes - we think the world needs another Pay Anyone service. But not like the rest. One geared to the needs of the B2B industry that is free for small businesses, and delivers to large businesses payments that can be post cleanly to their accounts receivable system.
That, my friends, should be a winner.
Billtrust announced today that we have acquired Open Scan Technologies based in Denver, CO. This is an incredibly interesting deal on so many levels and we couldn’t be more excited to welcome the Open Scan team to Billtrust.
Open Scan has been in business since 1998 and offers a software solution that helps with the “cash application” problem in the B2B payments space. For the 99% of the population that have no idea what this means, I’ll explain.
There are generally two types of billing, usually split along the lines of consumer billing (B2C) and business billing (B2B). Most B2C businesses use balance forward billing where each customer account has an outstanding balance and charges and payments are either added or subtracted from the account. Pretty straightforward.
In the B2B space, open invoice billing is the standard. Invoices are issued for each purchase and remain “open” until a payment or credit is applied. Sounds simple but the process of figuring out which payments apply to which invoices is incredibly expensive, slow, and error prone. Opening envelopes, scanning checks, analyzing remittance detail, handling disputes, and keying into an accounting system can be very complex. A lot of businesses just punt on this problem and pay their bank’s lockbox to do the work. Still expensive but at least it’s out of sight and out of mind.
Open Scan was founded on the premise that this problem can be solved with software. Their Dynamic Receivables solutions can automate over 80% of this process by automatically reading and recognizing remittance data and then matching that to a list of open invoices using sophisticated algorithms.
Billtrust and Open Scan share a bunch of clients and it doesn’t take a rocket scientist to figure out that maybe other Billtrust customers have the same sort of problems that can be solved by the Open Scan solution.
We partnered with Open Scan in 2013 and it became quickly apparent that this should be more than that; it should be a full-fledged acquisition. The cross sell opportunities, product synergies, and cultural alignment should make this deal a home run. We couldn’t be more excited about joining forces with the Open Scan team.
I spend way too much of my time thinking about how to transform the Business-to-Business (B2B) invoicing process. For those who aren't familiar with this wonderfully sexy problem, about 10,000,000,000 (that's billion) times a year a business mails a piece of paper to another business asking for payment. About 2,000,000,000 times per year, the other business mails a paper check back to the first business for payment (businesses often pay multiple invoices with one check, thus the disparity in numbers). And this is just in the United States. It is a huge mess that makes it incredibly costly for businesses to transact with each other.
Anybody remember what music distribution looked like before iTunes (technically the iTunes Store)? You could buy a physical copy of an album on a CD or go to a variety of different music publisher web sites to buy music. These options were less than desirable for a lot of people so pirated music sites like Napster and Kazaa flourished.
Well along came Steve Jobs to solve this problem. Apple launched the iTunes Store in 2003 and in a single stroke of brilliance solved the music distribution problem. This wasn't solved through a some major software innovation. This wasn't solved by all music publishers following the same standard. It was solved by hammering out agreements with music publishers with an innovative business model and doing the hard work to make sure that their music catalogs were ingested into the iTunes store.
Invoicing and music have some uncanny parallels.
The businesses that send out invoices, often called suppliers or billers, are the music publishers. The businesses that receive the invoices, often called the buyers, are the music consumers. Consumers pay for music on iTunes and that money flows back to publishers and artists. Similarly, money needs to flow from buyers back to suppliers.
The invoice distribution problem is not a new problem and many smart people have tried to solve it.
Electronic Data Interchange (EDI) was a standard that was developed back in the 90's that was one of the first attempts to solve this problem. While EDI has had some success with larger suppliers and buyers, there are a millions of business that don't speak the language and at this point most people agree that EDI is not the long term solution.
Email has been used as an invoice transfer protocol and many businesses send other business invoices via email. Email has been successful because just about every business can speak email. But email is a very messy solution that only solves part of the problem. Email cuts out the US Postal Service as the middleman. However, most businesses that receive email invoices still print them out and key them in manually. Email is also only one direction, payments still come back predominantly via paper check. Yuck.
Over the last two years Billtrust has quietly launched two solutions that we believe have a great chance of being the iTunes for Invoicing. In early 2012 we launched a product called Invoice Central which is our equivalent to iTunes. It is a single website that buyers can go to get invoices and make payments to numerous suppliers. The supplier universe currently available on Invoice Central is small but growing fast and we believe will eventually will house content for most suppliers.
The problem with Invoice Central is that a lot of buyers are larger companies that don't want to go to a website to retrieve their invoices. So in 2013, we launched another product called AP Connect (Accounts Payable), which is effectively a translation engine to allow invoices to be delivered directly into AP systems like Ariba and OB10.
With these two solutions, we have built what we believe are the building blocks of a system to allow businesses to transact more efficiently. Still a lot of work to do, but we're betting that this is going to be big.
We have dozens of hiring managers at Billtrust who are involved in the hiring process for their groups as well as other departments. They all have different styles for sourcing, interviewing, and hiring. As expected, they experience a variety of different results. Some are able fill open positions quickly with great candidates. Some seem to have the same requisitions open for months on end.
One conclusion could be that some reqs are harder to fill than others and therefore take more time. Need a Senior PHP Developer who speaks Italian and can juggle? That might take a while. While there is some truth to this argument, I've found that the same managers struggle to fill a variety of different spots so I don't think that explains everything.
Another conclusion could be that the compensation range that was set for the position was too low resulting in an inability to attract good candidates. That has certainly happened but after adjusting the salary range, some hiring managers still struggle.
So what is the secret to great hiring? Well it's really not much of a secret. Like most things in life, it's all about accountability.
Recently, two managers who were struggling to fill spots both gave me the same excuse - "we're not seeing enough resumes from our recruiters". My sarcastic response - "good excuse, I'll tell the Board that the reason we're not going to get that product released on time is because of our recruiters."
Great hiring managers treat hiring like sales. The most successful sales people are religious about managing their sales funnel. If you're not familiar with the sales funnels concept, it's really quite simple. Into the top of the funnel go as many qualified sales leads as possible. Coming out of the bottom of the funnel, are paying customers. Great sales people know if they want to make commissions, they need a lot of leads at the top of the funnel because invariably some are lost throughout the sales process. They also know that the responsibility of the leads and managing the funnel falls squarely on their shoulders. They don't make excuses like "I don't have enough warm leads" or "the prospect didn't understand."
Here are some parallels for what Hiring Managers might say.
Weak Hiring Manager (WHM) : Recruiting is not sending me enough good candidates (blames others)
Strong Hiring Manager (SHM) : I'm sourcing candidates from recruiting, LinkedIn, Twitter, my personal network, lawyers, accountants, and professional organizations (takes accountability)
WHM : We're not offering enough money for the kind of person we're looking for (blames others)
SHM : Interviews candidates at a variety of different compensation ranges and explains to the senior leadership team why paying more is the right decision for the right candidate
WHM : We lost the candidate to the competition
SHM : Makes sure there are numerous candidates for a position because invariably some will be lost.
Great sales people don't make excuses, they get it done. Same with great hiring managers. If you think hiring is Human Resources responsibility, then perhaps you should rethink. Every manager bears ultimate responsibility for their hiring.
