On the Same Page

E-invoicing has received a lot of attention in the last few years as one of the most promising means to soften the negative effects of the current economic crisis. But its potential to provide apparently huge cost savings has also created some misconceptions over its use, especially in regards to electronic invoices on the receiver side. However, by taking a closer look at use of e-invoicing, with an eye on some next generation recommendations, the benefit of taking it on board remains clear for both the sending and receiving end.

Defining principles

The use of e-invoicing has been steadily growing and in turn has produced a large number of documents that come from a wide range of backgrounds and serve several purposes.

The large amount of documents produced has a twofold effect on the broader awareness of e-invoicing. On the one hand it enhances the basic level of awareness of e-invoicing but on the other it also decreases the awareness of its specific aspects.

A common complaint is that communications in e-invoicing present similar definitions and descriptions for different topics, and different descriptions and definitions for similar topics. When each document is claiming to be the leading document, it is hard to determine which is right. This confusion can dissuade companies from investing.

This demonstrates how people in the field of e-invoicing and invoice automation are using different languages when it comes to communicating or selling its product or services, regardless of the professional scope or industry it will be used in. Of course, the use of proprietary phrases underlines their ambition to sell the products and services. On the other hand, this singular approach scares potential customers away. The customer presumes it will be a complex product typical of large IT projects, which often include inherent risks, investments and delays.

It seems, then, that we desperately need a common body of definitions. These definitions should create a framework that identifies which phrases are best suited to use in communications and discussions based on its description and context.

Such a framework would aid professionals to communicate a more common perspective on aspects of e-invoicing, thereby helping their customers understand what it is they are investing in.

A common language

So what should a framework for a common body of definitions look like? First of all we could start with the way e-invoicing is currently applied [see figure 1].

These are the models of e-invoicing: These are by far the most commonly used models when it comes to e-invoicing. And even at this early stage we can discover all kinds of other definitions and descriptions for these models. However, we should keep in mind that every definition for a model has its own context and this needs to be taken into account when using or developing a proprietary model. Now, each model is built upon several processes that effectively take the invoice from the sender's administration to the receiver. This is where it becomes interesting. The table below lists all kinds of processes. Processes from this list can be found in a model. Each process is a building block and can form a part of a model: [see figure 2]

These processes highlight the need for a common body of definitions because almost each process is available with a growing number of synonyms and descriptions. And the production rate shows no sign of decreasing. Instead, the growth of e-invoices in the last few years has seen an increasing need for proprietary definitions for identical processes.

Thankfully this can be made easier by looking at the context of a definition or phrase. The background for using a particular definition or phrase could be contextualised like so: [see figure 3].

At this point we can turn to technology, as this determines where in the process a phrase or definition has an impact on e-invoicing and invoice automation: [see figure 4]

From the customer’s point of view, it's a hierarchical list. The lower the level at which the phrase has its impact, the less interesting it is. Customers are typically only interested in the first three layers.

Myths and fallacies

A common body of definitions can also help rid us of some of the myths and fallacies surrounding e-invoicing.

It was calculated by CAST that the EU could save an annual €243m through a total adoption of e-invoicing. We should note that around 92% of EU companies are SMEs, 44% of which are SOHO companies with only one employee. These organisations are highly unlikely to use models with processes that will enable them to send out an invoice that can be easily processed by every customer. They would have to invest too much in technology.

The next issue to consider is the belief that standardisation will help overcome the lack of adoption of e-invoicing in the EU. Apart from standardisation, the lack of awareness and complex cross-country legislation on e-invoicing and digital signatures is often cited as a key barrier to its adoption. It is commonly believed that a standardised format of invoicing would generate large benefits. That is why the financial sector is arguing that the four-corner system is best suited for generating the financial benefits of e-invoicing.

When it comes to considering technology things get really interesting because customers have shown they are absolutely not interested in standardisation issues. Financial directors simply want to know which functionalities are available, what model they should adopt and why.

The discussion on standardisation of an UBL-XML-EDI-ISOCII- like standard should be a non-issue for financial directors.

The biggest myth of them all

There are a lot more myths surrounding e-invoicing but the fallacy of adoption stands out. E-invoicing is currently carried out from a sender's perspective, based on the financial and qualitative advantages that it promises. While it is easy to believe that with sufficient supply demand will automatically follow, this has not been the case with e-invoicing.

The receiver of an e-invoice plays a pivotal role. Legislation currently states that only when the receiver accepts an e-invoice can the sender proceed. So the sender can only start saving with e-invoicing after the receiver has accepted.

Now imagine that a sender wants all of its customers to accept e-invoices. Studies have found that the receiver can save four times more on an e-invoice than a sender can, under the condition that the receiver can conveniently process this e-invoice.

For e-invoicing to succeed, it is necessary for the sender to be able to connect to its customers, rather than the other way around. Standardisation does not help because it is a lengthy process aimed at the 6% larger EU organisations. The SMEs still have to deal with a diverse group of customers that won't be pushed around with a singular format approach.

The next generation

To achieve massive adoption of e-invoicing we should avoid:

• developing proprietary definitions and phrases
• imagining that format standardisation alone will save €243bn
• pushing one model or standard into the domain of financial directors and their customers
• disregarding the power of the receiver when it comes to the adoption of e-invoicing across Europe; instead focus on the effects of chain digitalisation
• disregarding the diversity of our customers; instead, we should develop a framework that enables every profession to understand what we are saying and create a mindset that e-invoicing is part of what is called ‘networked economics’.

Finally, we must embrace the receiver of the invoice in the belief that they are a key holder for savings on both sides.