Despite clear advantages, adoption of e-invoicing is still quite rare. This is largely due to misconceptions around the investment in technologies required and the perception of low ROI.
Globally, approximately 150 billion B2B invoices were processed in 2012, but only around 5 per cent were electronic. However, given that a fully automated and electronic invoicing system can generate cost savings of 60 to 80 per cent and efficiencies of 1 to 2 per cent of total turnover, and pay for itself in 0.5 to 1.5 years, can any company (including yours) really afford not to consider it an option?
We define an e-invoice as a fully automated and integrated electronic invoicing solution. By increasing its usage companies can achieve significant cost savings. Paper-based invoicing is time-consuming, susceptible to errors, requires manual intervention from both the supplier and the buyer, and has many associated expenses. E-invoicing can produce cost savings in accounts receivable in the range of 40 to 60 per cent, and in accounts payable, up to 90 per cent.
It offers you the ability to improve cash flow management by providing revenue-generating opportunities in the process. There is also the legislative compliance consideration, as many governments around the world have already authorised the use of e-invoicing for their public-sector institutions, which facilitates its adoption by the private sector. Within the EU, e-invoices now carry the same legal status as paper-based equivalents. The environmental benefits cannot be ignored either - the carbon footprint of an e-invoice is only one-third of that of a paper invoice.
By far the largest benefit from e-invoicing is process automation. When your systems are integrated with the e-invoicing software, transfer errors between applications can be removed, which also reduces time and costs associated with rework. The process enables you to send, receive and route invoices to the relevant individuals automatically and resolve discrepancies efficiently. Process efficiencies eliminate invoice errors, reduce staff time dedicated to follow-up calls with customers and suppliers, and facilitate the effective electronic archiving and retrieval of all invoicing documentation for audit and tax purposes.
Consequently, this frees up staff time to focus on more value-adding activities in the company, such as customer service. The result is improved relationships with buyers and suppliers, which in turn provides a sound platform for your future business negotiations. Also, suppliers can benefit from a better days sales outstanding (DSO) performance, and buyers can take advantage of early payment discounts available to them. In larger organisations, discounts can equate to 1 to 2 per cent on the total amount per e-invoice.
The benefits to be gained from e-invoicing are manifold, and the road to automation should be carefully planned and managed. Considerable advances in the areas of cutting costs, improving processes, releasing cash flow and staying compliant, among others, are realistically achievable with e-invoicing, and you can reap the benefits immediately.
☛ Guy Cabeke is associate principal at REL.