E-invoicing – which business case suits best in your company?
What does 'e-invoicing' mean?
Electronic invoicing is the process of invoicing clients digitally, rather than through a print and post process. Many businesses have been using e-invoicing for years now, but some enterprises are yet to be convinced of the true value and impact that a simple process change can have on their company.
Is it right for your business?
While businesses in some industries - such as manufacturing - have been urged to switch their accounts receivable process by their larger clients, they often retain their paper-based invoicing for their smaller clients.
Meanwhile, there are buying companies that have e-invoicing in place with many vendors but have to deal with a host of invoices that arrive in an unstructured format. They are forced to process these invoices manually, increasing the risk of errors and costing the business more money in time to correct these mistakes. Unless they implement proper automation of the content services.
It's easy to say that switching to e-invoicing is the more efficient option, but business case in each company may differ due to the number of business partners, geographical operations, internal structure and mostly the documents volume. Each company should analyse individually whether the current level of e-invoicing project brings the expected benefits.
What are the business cases for e-invoicing?
Any business that's mulling over a possible switch to e-invoicing needs to analyse its current internal processes.
- What's the current volume of AR and AP invoices? How many partners and clients does the business have?
- Cross-border invoicing - which countries are engaged in the e-invoicing project? Are there going to be any issues with legislation?
- Costs to AP/AR departments and archiving - both direct costs (e.g. printing and stamps) and indirect ones (e.g. disputes resolution to find the invoices, customer requests for copies of lost invoices, archiving). According to Billentis the direct staff costs in the AR department vary between €2.50 and €10 per invoice, while costs in the AP department already vary between €5 and €15 per invoice.
- IT system requirements.
Organisations that choose to change to e-invoicing should consider a centralised approach. By applying the change to the entire group, the organisation can maximise the benefits and create a unified process that's easy to understand.
The organisation should analyse the volume of inbound and outbound documents and combine the processes with internal document management.
The analysis should also consider the technological maturity of the business partners to understand how much time and energy they will need to spend on training and support as they adapt to the new processes and software. Some partners may be interested in tools integrated into their systems, while others may prefer to use web-based applications. This information is crucial for planning the on-boarding operations.
Another point is legal compliance. As different laws and regulations apply to business partners in different countries, legal requirements which may be unknown or confusing pose the greatest challenge.
Some regions require organisations to process e-invoices through government bodies (the clearance model, mostly used in the LATAM region). In some other nations, issuers of e-invoices send their documents directly to recipients, but they are required to prove the veracity of archived invoices for up to a decade later (this is known as the post-audit model, used by the EU and the Commonwealth). In recent years, there's been an increase in countries requiring e-invoicing to go through public administration bodies.
Finding the right for your company's needs
For a process as complex as e-invoicing, you need a comprehensive solution. One that fully automates the creation, transmission, delivering and managing of documents to make processing an invoice easier and more convenient.
There are many standards and norms, and business partners have different expectations about how they want their invoices delivered and received. It's important to find a proven solution that provides the implementation of data exchange with any business partner, regardless of technological maturity and geographical area.
Some companies may look for different providers covering separate stages in the process, one for EDI, another for paper and scans, and yet another for invoice management. Such an approach may result in inattention and poor prioritisation. It can cause incompatibility between systems, and stall the unified approach that's key to implementing an automated end-to-end process.
From e-Invoicing to Procure-to-Pay
Automating the e-invoicing process may bring further benefits when integrated with other processes within the company.
The holistic approach called order-to-cash, or procure-to-pay, guarantees that the organisation can also automate other processes in the supply chain and integrate them with invoicing processes. A comprehensive approach to both internal and external communication with all partners - including the exchange of the product, commercial, logistic or financial data - brings about the best results. As a result, companies benefit from fast and secure access to reliable data, optimisation of processes, and a reduction in the cost of handling documents.
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