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Keeping the Tax Auditor at Bay and Saving Time and Money in the Process

Posted in PayStream Analyst, C2B Payment & Collections, B2B Credit and Collections, Purchase to Payment, Voices by Dave Schmidt on March 12th, 2009

The regulatory environment surrounding sales and use tax is much more complex than most people realize…at least until you consider that there are over 13,000 taxing authorities in the USA, and that they made over 1400 rate changes in 2007. Jurisdictional boundaries are constantly changing, too. Incorporated municipalities regularly annex adjacent tracts of land, regional school districts often add or drop students from neighboring municipalities and so forth. And while a jurisdiction’s sales tax rate may be quoted as 6 percent, the price point at which the next penny of tax is collected can vary from the first dollar to the second and even beyond.

How a product is used can also affect its taxability and multiple layers of taxing authorities create additional variables. The typical fortune 500 corporation will offer over 1000 unique products and services, and will file returns each month with more than 74 different tax jurisdictions. Even if everything you sell is for resale, you still need to validate sales tax exemption certificates. In order to get it right and to then process all the filings requires significant dedicated resources.

Dealing with government auditors is another drain on resources. With state and local jurisdictions strapped for cash, government revenue departments are increasingly turning to audits to boost cash flow. The dollars involved are huge. Thirty-five states rely on sales tax for over 25 percent of revenues. The states also claim that e-commerce reduced sales taxes by a whopping $21.5 billion last year, and they are finding innovative ways to get their piece of that pie. For example, New York State has enacted the so called ‘Amazon Tax,’ which attributes nexus to online stores that merely get customer referrals from other websites based in New York.

As a result, businesses are turning to Tax Compliance Automation (TCA) solutions to address the complexity of their sales and use tax environments. TCA provides a set of technologies that ensure the accurate calculation and timely reporting of sales and use tax. Central to TCA solutions is a tax engine that addresses buyer and seller types, product taxability, order amount, tax jurisdiction identification and tax rates. The technology is supported by managed services that provide continuous rate updates and ‘geo-coding’ to correctly identify buyer and seller nexus. Together, software supported by managed services, enterprises are finding TCA solutions dramatically increase accuracy while reducing overhead.

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tagged b2b, b2b collections, B2B Credit and Collections, b2b payments, C2B Payment & Collections, PayStream Analyst, Purchase to Payment and Voices

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Payment Tsar & Payment Quotient - Which Comes First, the Chicken or the Egg?

Posted in PayStream Analyst, C2B Payment & Collections, Consumer Finance, Contributed, Voices by PayStream Advisors on November 14th, 2007

We talk a lot about Business and Financial Process Optimization at PayStream. To quote Austin Powers, “It’s our bag.” But these two terms are fuzzy and often used in the industry without really drilling down into what exactly they do and/or mean.

I personally believe the novelty and uniqueness of our approach lies in the methods and goals we advocate for. Specifically, we underscore the Payment Tsar and the Payment Quotient as the primary goals of process optimization, as they provide strategic visibility, risk mitigation, and encourage entire culture shifts towards financial automation and efficiency.

A Payment Tsar/Tsarina is unique as he or she holds a C-Level position and is personally in charge of maintaining strategic visibility over the entirety of the financial supply and payment chain. This individual, properly endowed with effective tools and authority, is capable of informing his or her entire company on strategic process efficiency initiatives, up to and including major automation solution implementation.

At the same time, when we encourage clients to advocate for the Tsar or Tsarina, we talk about the Payment Quotient, an extensive best-practice rubric tool that guides their initial decision making process and naturally leads to the sort of corporate practices that establish a Payment Tsar. The Payment Quotient demands high-level analysis of all the various vendor/supplier/customer/expense/spend channels, segmenting them to achieve maximum visibility into the financial process.

For example, in the world of Credit and Collections, the some questions that Payment Quotient analysis would ask are,

How many payment channels are there?
How many customer segments are there by payment channel?
How much does it cost for one or another customer to pay by a particular channel?

So the Payment Quotient is a tool that highlights the need for a dedicated C-Level employee that constantly collects and analyzes these types of questions. At the same time, the Payment Quotient, or a modified version unique to the enterprise, is exactly the collection and analysis that leads to strategic visibility.

The question must be asked then, which comes first? The answer is whichever will get both the Tsar/Tsarina and the strategic visibility the fastest. If Management is on board to bring on a Tsarina because it’s aware that only such a position is capable of establishing true strategic financial visibility, then she will proceed the analysis. If Management doesn’t see the benefit of her position until it’s proven that without her the company will lack strategic vision, then Payment Quotient analysis needs to happen first.

The second is obviously the more difficult scenario - The solution, we’ve found, is for a team-player with the vision to become the Payment Tsar to formulate a cross-functional team that promises to bring together the data necessary to make Payment Quotient analysis.

These sorts of best-practice financial management positions and decisions are only now becoming possible due to the extraordinary analytic power of next-generation financial automation solutions. Putting all the pieces into play is challenging, especially when Management lacks cohesive strategic vision. The first question that you need to ask is, which comes first, the chicken or the egg?

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tagged C2B Payment & Collections, Consumer Finance, Contributed, electronic bill payment, electronic collections, financial automation, payment quotient, payment tsar, PayStream Analyst and Voices

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The Advantage of Self-Sevice Autopay Enrollment

Posted in PayStream Analyst, C2B Payment & Collections, Contributed, Voices by PayStream Advisors on November 14th, 2007

If you need consolidated evidence that there are tremendous advantages that electronic collections and/or payment networks promise to collectors, look no further than Bank Technology News‘ recent article, “The Innovators 2007.”

I call attention to two impressive details having to do with customer enrollment:

Bank of America reported that online customers are 27% more profitable than traditional customers, with deposit balances 15 percent higher and loan balances 28 percent higher.
SunTrust Banks found that customers who receive at least three e-bills per month have a 78 percent lower attrition rate and were 86 percent more profitable than offline customers. The implementation of the Web RXP version prompted a strong initial boost in the number of customers signing up for ebills, says Sarah Overcash, SunTrust avp and online bill-pay product manager, with nearly 30 percent of the bank’s active online base currently receiving at least one e-bill.

Consider this in relation to the rather sluggish response by the Credit and Collections industry to move towards on-line self-service payment enrollment channels. As Henry Ijams recently expressed to me, “In a credit crunch situation where an individual is only able to pay three out of four bills on-time, he’s going to skip the one that’s a pain to pay.” Furthermore, customers used to paying with a self-service on-line channel are more likely to take advantage of auto-payment enrollment tools.

On that note, consider the advantage of auto-pay - the visibility it provides into the future of that customer’s payment record - the repetitive payment it encourages - the ease of payment the customer becomes accustomed to. Now ask yourself, what percentage of your customers pay you automatically?

OR, perhaps equally as important, are you able to account for clients who are using third-party on-line banking tools to pay you automatically? And is it possible that you can encourage that payment behavior to complement your own enrollment program?

PayStream recently published a vendor buyers’ guide on Receivables and Collections Management - The complementary white paper and full guide are available here.

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tagged bank of america, C2B Payment & Collections, c2b payments, Contributed, ebills, electronic collections, financial automation, Henry Ijams, PayStream Analyst, suntrust banks and Voices

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Consumer Electronic Bill Payments - Choice, Convenience and Control: What’s your Payment Quotient?

Posted in PayStream Analyst, C2B Payment & Collections, Consumer Finance, Contributed, Voices by Sushmitha Koka on October 29th, 2007

Did you know that each Starbucks store offers almost 70 different types of beverages? Order a Blended CrÃ¨me Frappucino at a Starbucks and donâ€™t be surprised if they ask if you want to make that a Double Chocolate Chip, a Tazo Green Tea, a Strawberries-and-CrÃ¨me, or one of five other types of Blended CrÃ¨me Frappucino. Itâ€™s all about choices, and where there is consumer demand, there are bound to be options.

Consumers today are bombarded with numerous choices when shopping for, and we have to admit that it has become a way of life. It is not surprising, therefore, that consumers not only demand a range of products and services, but also a variety of options when it comes time to pay the bill. They are also looking for convenient options to make payments, as well as control over the frequency and timing of the transactions.

These three aspects â€“ choice, convenience and control â€“ are driving the dramatic shift in consumer behavior from paper payment options to electronic mechanisms. Most traditional billers are underserving the needs of their consumers. PayStream measures this with a metric we call the Payment QuotientTM.

The changing dynamics of consumer preferences have created a distinct opportunity for consumer biller organizations (utilities, credit card and telecom companies etc.) to optimize the way they collect funds. However, the decision to offer a variety of payment options is not as simple as it seems. Each additional payment type and channel offered by billers might result in improved customer satisfaction, but will also lead to increased costs and management issues. The PayStream Payment QuotientTM measures how effectively the biller is satisfying the needs of the consumers. This satisfaction index is divided by the costs of maintaining all theÂ payment channels (Agent, IVR, Web etc) and payment types (Check, Card or Cash).

Billers are taking a serious look at automation solutions based on their potential to satisfy their customersâ€™ desire for simplicity and flexibility throughout the billing and payment process. The goal is to satisfy consumersâ€™ appetites, without leaving billers with any heartburn. In short, maximize functionality at an acceptable cost. A well-thought-out consumer payments automation strategy can benefit both billers and consumers by allowing billers to collect funds more quickly and cheaply, and by offering consumers more options as to when and how they pay.

Download PayStream’s complimentary Technology Insight Series Report, Consumer Payment Automation: Paper or Plastic?

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tagged automation solutions, b2c collections, C2B Payment & Collections, c2b payments, Consumer Finance, Contributed, electronic bill payment, PayStream Analyst and Voices

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Consumer Electronic Bill Payments: DOs and DON’Ts

Posted in PayStream Analyst, C2B Payment & Collections, Contributed, Voices by Sushmitha Koka on October 29th, 2007

“Build and they will buy,” was Henry Ford’s mantra in the early 1900’s when he introduced his first horseless carriage, the Model T. He built, and consumers eagerly lapped up the cars as soon as they came off the assembly line. But today, more than a century later, the days of Ford’s Model T are long gone.

Biller organizations â€“ utilities, telecom, credit cards, mortgage companies and others that bill consumers on a recurring basis â€“ can no longer be confident that all they have to do is provide easy and convenient electronic options for bill payments and their customers will adopt them. Results of a Billing and Collections Survey by PayStream Advisors, a Charlotte, NC-based research and consulting company, validate this fact.

The survey revealed that biller organizations were forging ahead on the automation curve â€“ with 74 percent of survey respondents offering an electronic option when it was time to pay the bill, whether it was accepting payment over the Internet, the telephone or even automatic recurring debit. However, it was a completely different story when the survey measured actual consumer adoption and usage of these electronic bill payment methods. While there were wide variations by industry, the common trend was that less than a quarter of consumers, on average, were taking advantage of the alternative payment mechanisms offered, preferring to rely on paper-based payments through cash or the ubiquitous check.

There is no doubt that billers are building robust e-payment systems hoping to reduce costs and improve customer service, but consumers are not always buying into the value proposition. Here are some do’s and don’ts to keep in mind to help billers move from implementation to adoption of e-payments quickly and efficiently.

DO make the system simple and intuitive to use to increase adoption of e-payments.
DON’T offer a patchwork of services for different payment channels and types.
DO charge convenience fees for flexible payment options and to migrate consumers from expensive to cost-effective channels.
DON’T ignore the fact that billers and consumers have divergent priorities - consumers want to pay late while billers want to accelerate payment
DO design an e-payments program with the appropriate consumer incentives in mind.

Download the PayStream Technology Insight Series Report Consumer Payments Automation: Paper or Plastic?

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tagged accounts payable automation, b2c collections, c2b collections, C2B Payment & Collections, Contributed, electronic bill payment, improve customer service, PayStream Analyst and Voices

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