Swisscom IT Services: Invoice Recognition – Andreas Brandl

Swisscom IT Services' Andreas Brandl tells FDE about developments in e-invoicing, including economies of scale, market penetration and the 2012 Swiss government e-invoicing initiative.

FDE: How do you define e-invoicing?

Andreas Brandl: Common sense would suggest that an invoice issued, sent, received and processed in a purely electronic format is an e-invoice, as long as it is legally compliant. However, if you change the perspective and look at it from a CFO’s point of view, things are a bit different. In this case, I would consider an invoice received and processed electronically an e-invoice, probably not taking into account how it has been issued.

This may be a less strict definition, but if you focus on your own organisation it is perfectly valid. CFOs who constantly seek to cut costs, not just in times of economic difficulty, are more successful taking this perspective.

Is this a reflection of your own service portfolio?

Yes, it is. We complement our core e-invoicing services with scanning and printing services. This allows for a 100% rate of electronic invoices, from a single customer's perspective, in a short timeframe. We decouple our customers from the abilities of their trading partners.

We have recently finished a project with a large Swiss bank in three months and are now processing all of their invoices from a total of 17,000 suppliers. This is simply not possible with more traditional on boarding strategies relying solely on electronic means and the buying of the suppliers.

But isn’t this a more costly approach than a purely electronic invoice?

Yes, it is. But if one takes the savings per invoice into account, it is still only a fraction of today’s processing costs. And it doesn’t exclude bringing your trading partners to an electronic solution; it just offers more flexibility and a quicker return on investment.

How much appetite for e-invoicing have the Swiss had to date?

In terms of our own business, we have seen a stable annual growth easily exceeding 30% over the last two or three years regarding transactions and revenue. However, the market is still young and there is still a huge amount of non-electronic invoices issued every day. This is good news for CFOs; it means that there is still a huge potential to reduce costs associated with invoicing processes.

Although Swiss companies started quite early with e-invoicing in 2004 after the first e-invoicing related legislation came into force, there was no major uptake or exponential growth in the broad market. But we haven’t seen this happening in other European countries, with the exception of the Nordic countries perhaps. As far as I can tell, there is no major difference.

What is the 2012 Swiss government e-invoicing initiative? How will this initiative change the invoicing landscape in Switzerland?

The e-invoicing initiative is part of a broader initiative called ePower. The goal is to make better use of information and communication technologies for the benefit of Switzerland as a location for business. It is supported by many companies in the industry, including Swisscom. The most popular goal these days is the legislative initiative on e-invoicing. Put simply, it demands that the Swiss government only accepts e-invoices as of 2012.

As far as the invoicing landscape is concerned, I expect a major change, particular for SMEs. Currently, mainly large enterprises focus on e-invoicing, often as part of ongoing process improvement programmes or as a reaction to budget cuts. SMEs are generally only taking part in electronic processes at the demand of their large customers. This initiative will force SMEs to actively deal with the subject as well, for their own benefit.

There is a similar legislation in the Nordic countries and the benefit for the whole industry has been quite obvious. It is not by accident that they have the highest e-invoicing penetration in Europe. Substantial market uptake always requires the involvement of the big players, and the public sector in any country is one of the largest. Therefore, I expect a rapid growth in the coming years, at least if there are clear signs that the initiative is going to be successful.

At the moment, it is still at a rather early stage. My hope is that the relevant stakeholders will understand that the initiative is not to impose additional hurdles to enterprises, but to support a development which is beneficial for all players in the market.

What are the key benefits for companies that choose e-invoicing?

As far as invoice recipients are concerned, the most obvious point is to reduce process costs. Most studies conclude that a single paper based invoice costs €50–€80 if all process activities are taken into account – from opening the envelope to archiving for ten or 20 years. This figure is also confirmed by most of our customers. An electronic process can reduce these costs by more than 50% and there are other advantages such as data quality, high security and good cycle times.

However, you need a reasonable volume of invoices to start with. E-invoicing is another good example of economies of scale. Another important aspect – in my eyes often underestimated – is that a company introducing e-invoicing should seek to eliminate the whole of their existing processes rather than just reducing the volume. For example, if you cut your paper invoice volume for domestic invoices to 30% you may be able to reduce the headcount in the relevant departments more or less accordingly, but you still have a process to maintain. This is exactly why 100% e-invoicing rates, in my opinion, are so important: they allow eliminating processes completely.

The benefits for invoice issuers are less obvious. There are cost savings in the area of printing, enveloping and postage, but they are less significant unless you have very large numbers.

Other financial benefits can be seen in earlier payments and thus improved liquidity, certainly not to be underestimated in these days. But there is another very obvious advantage often overlooked: the customer demands it. The ability to issue invoices electronically is often a key requirement in RFPs across all industries, regardless of the nature of the products or services.

This alone should be sufficient to deal with the subject in advance, especially with the Swiss government initiative already on the horizon.

How has Swisscom IT Service’s e-invoicing solution evolved? What is on offer today and what is planned over the next few years?

We started to work on e-invoicing solutions as we know them today back in 2002, based on a strong foundation in EDI-clearing and e-procurement. It was not a hot topic then but we believed that invoicing would benefit most from electronic processes. We had the first VAT compliant service in Switzerland.

In the meantime, it has become an international solution that is currently compliant in 32 countries. The scanning services are newer; they have only been part of our portfolio for six months.

Our future developments have a clear focus on making it even easier for small companies to participate in e-invoicing processes. There is still room for improvement on applications, processes and commercial models. We are also looking into the basic principles of successful social networks and trying to adapt those elements so that they might also work for business communities. We will come up with a first solution in that area later this year.

Concerns about VAT and digital signatures have been raised. What are these concerns and how have they been addressed?

Tax revenues are a major source of income for governments. Therefore it is quite understandable that VAT authorities and enterprises raise concerns when well established processes are moving away from a known traditional approach to electronic solutions. They are concerned about new options for tax fraud.

The new directive on invoicing and VAT published by the European Commission early this year proposing equal treatment for electronic and paper invoices may set false expectations in the market and even uncertainty to some extent. Although there are no formal or specific requirements for electronic invoices, the basic principle of tax auditability is still in place. In other words, a taxable person still has to prove that an invoice is real and unchanged over the whole storage period. This can now be done by any appropriate method, for example by providing additional documentation or even related business documents like delivery notes. In my opinion, digital signatures have proven to be the most effective way to guarantee integrity and authenticity of an invoice. Other methods include a deferred risk of objections during a tax audit.

However, I appreciate the new directive because it creates new momentum for the market. From a practitioner’s point of view, I expect no major changes to solutions in place today.

Andreas Brandl Swisscom IT Services' Andreas Brandl