Why E-Invoicing Fits The Bill

In the information age, businesses are increasingly switching over to digital to provide employees and customers with information at the touch of a button. In this context, it is both surprising and worrying that business-critical invoices are still shared and sent mostly in paper-based format.

Despite the many pitfalls of unreliable paper processes, out of 30 billion invoices sent in Europe in 2010, only 10 percent were done so electronically. In a global economy where the majority of processes are now automated, such a heavy reliance on paper-based business systems seems increasingly risky.

Recent data from the Ricoh Process Efficiency Index sheds new light on the wider challenges businesses face when it comes to managing document processes across the enterprise, of which invoicing is a significant function. The findings revealed that across Europe, employees responsible for managing business critical document processes spend a combined 362 million hours of their time per year on the function, which amounts to an overall business cost of €147 billion.

Clearly, there are significant savings to be made if these processes are efficiently automated, so why are businesses not addressing the problem?

Roadblocks to reform

Unfortunately there are many barriers preventing organisations from switching over to digital management of their business critical documents, fragmentation, cost and concerns around legal standards and interoperability to name but a few. However, the emergence of managed services is beginning to break these barriers down.

Managed services can provide a hybrid approach to total invoice management to help businesses make a gradual transition to electronic invoicing, by processing both paper and electronic invoices based on buyer and supplier preferences.

Ricoh’s Process Efficiency Index shows that, on average, 42.5 percent of all business critical information is still stored in hard copy format – a worrying figure. There is no doubt that invoicing contributes significantly to this statistic, as it remains one of the last bastions of manual processing. It’s also labour-intensive, inefficient, expensive and error-prone.

Analysts Quocirca estimate that the cost of processing paper invoices through manual means can range anywhere from €8 to €10 per invoice, which is significant when applied across the numerous pieces of paper that businesses process on a daily basis.

Pitfalls of paper-based processes

Manual processes can also result in slow invoice reconciliation making it hard for businesses to secure early-payment discounts, which in turn can result in poor supplier relationships. Furthermore, organisations that continue to rely on paper-based invoicing methods may struggle to prepare audit trails for closing books and meeting the requirements for European VAT audits.

Ricoh’s study indicates that only 39 percent of companies have the ability to follow an audit trail for all their business critical documents. A high reliance on paper also comes at a heavy environmental cost – not only in paper waste but in the associated energy costs of transporting physical invoices, leaving businesses open to charges of harming the environment.

Paper-based processes can also cause major problems with disaster recovery scenarios. As Ricoh Europe’s Carsten Bruhn recently noted, “If critical information is processed using traditional hard-copy methods, business risk is enhanced as the data is less likely to be backed-up.”

Despite these obvious problems, research from the Process Efficiency Index shows that European businesses overwhelmingly acknowledge that there is still room for improvement in the document process function. Respondents to the study said that their top three priorities for their business critical document processes in 2011 are to increase knowledge sharing, improve security, and improve workforce effectiveness.

It is unsurprising therefore that more businesses want to implement electronic invoicing (e-invoicing) to remove manual processes, speed up invoicing cycles and eliminate non-value add activities for accounts departments. Benefits of e-invoicing are far-reaching across the business.

Quocirca estimates that e-invoicing can enhance business efficiency through reducing the costs of handling invoices by up to 70 percent. The most obvious benefits are the direct cost savings for sending the invoice (paper, postage and printing) and in processing (accepting the invoice, processing and approving it) for the recipient.

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