Why E-Invoicing Fits The Bill

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Making the move to digital

These compelling drivers are now set to broaden e-invoicing adoption, enabling more organisations to begin the transition to electronic invoicing. Throughout 2011, approximately 5 million European businesses are expected to send or receive electronic invoices.

Initiatives such as the European Commission’s plans to revise the E-Signatures Directive are a bid to encourage businesses to make more use of electronic invoices. Electronic invoicing is also part of the European Commission’s flagship “A Digital Agenda for Europe” which wants to see e-invoicing to be the predominant form of invoicing by 2020.

Today the market is categorised by a mixture of software products deployed on-premise, and hosted services, most of which offer integration to enterprise resource planning (ERP) systems, compliance with differing country regulations and supplier on-boarding. E-invoicing networks are becoming more popular as invoices, regardless of data standards, are interchanged via a third party service provider or invoice portals.

Once enrolled in a network, which may charge an upfront fee as well as an on-going fee, a supplier can send electronic invoices to any customer on the network.

However, these networks rely on full supplier and buyer participation, and generally appeal to larger businesses.  Smaller suppliers may have little incentive to participate in networks and may not be able to justify the joining fee. But in a competitive environment they can feel under pressure to comply in order to retain the business.

Meanwhile, as organisations move to electronic invoicing at a different pace, they will find themselves operating disparate processes for handling paper and electronic invoices. Poor integration of these processes is costly and inefficient and causes long-term damage to the business.

An enterprise-wide decision

With e-invoicing requiring buy-in along the whole supply chain, a big-bang approach to e-invoicing is not realistic. Consequently, some leading businesses are adopting a hybrid approach which provides a phased transition to e-invoicing, whilst enabling them to retain paper-processes for some suppliers and buyers where appropriate.

A managed service provider takes full control of the invoice process – including the manual capture of paper invoices and document scanning, the handling of a diverse range of invoice receipt formats (e.g. xml, CSV, EDI, fax, email or paper) and the sending of invoices in a buyer’s preferred format. Software is developed, maintained and operated by the provider, with customers paying a “fee per transaction”, enabling lower costs.

Those businesses at the forefront of e-invoicing are already reaping the benefits. Ricoh, a managed document services provider, cites the example of a sportswear manufacturer who operated an expensive and inefficient invoicing process. Mailing 4.5 million paper invoices and statements a year, they outsourced their entire invoice process, planning to transition from paper to electronic invoicing over three years.

Using Ricoh’s i-Invoicing service, according to customer preference, invoices are either uploaded to a web portal for online viewing, or printed and dispatched by conventional means. Customers are able to download and pay bills by logging on to the secure web portal. The number of paper-based transactional documents distributed by Ricoh on the manufacturer’s behalf is expected to reduce by 3.6 million per annum, saving €3 million.

By not restricting the format of invoices, a managed service ensures that the benefits of e-invoicing are not limited to just large enterprises, but also extended to small and medium-sized businesses who will gain access to a wider market of potential customers and suppliers, especially larger organisations who may prefer working with e-capable trading partners.

E-invoicing will be a major factor in making business processes more efficient for many businesses in the future. Those that start the move to digital now will stay ahead of the competition as the e-invoicing market steadily builds towards critical mass.

Martin Hurley is vice president and general manager of Ricoh Europe’s outsourcing services business.