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e-Invoicing–Part 1: What is an e-Invoice and how to create its context

by | July 31, 2018

Did you know that invoices account for 10% of all trees cut worldwide? Not to mention the millions of pounds and energy invested in producing these paper invoices annually. There are multiple reasons for giving up paper-based invoices and turn to the more efficient and environment-friendly solution, which is the e-invoice.

e-Invoicing has been around for some years now, and while companies have been skeptical in the beginning, and many of them still are, it started to pick up in the last years, with many governments also planning to eliminate inefficient paper processes and encouraging companies to adopt e-Invoicing.

What is an e-Invoice?

Before we dive into the subject, it’s important to give a precise definition of what constitutes an e-Invoice.

“An e-invoice is an invoice that is transmitted electronically and is intended to be processed automatically by the receiving system without manual intervention or printing. It does not include email, PDF attachments and OCR invoices.”

Is e-Invoicing right for your business?

Let’s take the most obvious argument in adopting e-Invoicing – the environmental benefits. While this does not directly affect your business, we are all inhabitants of this planet and we need to take as much care of it as possible.

Taking things to a more business-related environment, there are a few things companies should take into account, in order to decide on how to go about e-Invoicing.

  • P2P software implementation – Whether you’ve already implemented a P2P software, are about to go live, or just considering this, e-Invoicing will likely be an option available to you. Is your P2P software able to deliver? Are you making sure it is delivering to its full potential? And more importantly are you basing your P2P implementation on a solid business case? Answering these questions should prepare your organisation in becoming e-invoice enabled.
  • Stakeholder resistance – whether we’re talking about your partners and suppliers or your internal staff, there is always the possibility that the newly implemented P2P system will be rejected, either because your stakeholders lack technical knowledge or they lack visibility over the business case.

Changing from traditional invoicing to e-Invoicing starts, for most companies, with anxiety. It is the fear of the unknown causing clients to miss out on realising all the benefits of their system. This concern is often based on the unknown and an assumption that most suppliers will say “no”.

The solution is fairly simple. You need to make sure that everyone understands the benefits behind the change and how this will make things easier for them. For procurement experts, the benefits behind implementing a P2P software and enabling e-Invoicing are obvious, but the business needs to make sure everyone is aware of the potential to deliver savings, improve relationships and processes and open new possibilities.

Cost & technology considerations

Any investment in new technology and tools comes with additional cost for the company. On the long-term e-Invoicing can save significant costs, but in the initial phase the business needs to be aware of the costs this investment brings and to choose the option that is the best fit for the company and for its transactions volume – as this can make a great difference in the technology you chose.

High volume transactions will be integrated on the P2P portal to enable invoice automation. With this comes the potential for the costs of this automation to be passed onto the buyer. Portals offer easy-to-use PO-flip and invoice entry functionality for lower transaction volume suppliers.

Whichever option you chose for your business you need to understand and take into account the areas where additional costs may arise.

Last but not least, implementing an e-Invoicing solution will also generate supplier enablement costs – whether this is done by a third party or internally. Companies need to plan ahead for this process, to prioritise their suppliers and to plan for the additional costs.

By the looks of things, we can say almost with certainty that in the next couple of years companies that are still using traditional, paper-based invoicing will find it more and more difficult to stay ahead of their more digitally enabled competitors.

Same goes for suppliers, now more than ever, we have the technology to make mass participation much easier, even for small suppliers – as they can turn a PO into an invoice simply by accessing a web link. We now have the technology and the benefits are obvious, we just need to make that first step and stop assuming that suppliers won’t follow – probably because they haven’t been asked in the first place.

However, many companies still question if it’s the right time or if it’s at all suitable for their business. As businesses are made up of people and human nature is the way it is, fear of the unknown and resistance to change are 2 of the major set-backs when it comes to e-Invoicing.

Stay tuned for the second part of this blog series as we explore even further the benefits e-Invoice enabled companies can achieve and the KPIs they need to measure, in order to ensure a successful process.