Digital invoicing: How to nudge paper systems closer to the shredder

What's the best way to manage that shift to e-invoicing?

...of the European Commission's flagship Digital Agenda for Europe, which wants e-invoicing to predominate by 2020.

Today the market is categorised by a mix of software products deployed on-premise and hosted services, most of which offer integration to enterprise resource planning systems, compliance with varying country regulations and supplier on-boarding.

Growing popularity of invoicing networks

E-invoicing networks are becoming more popular as invoices, regardless of data standards, are interchanged via third-party service providers or invoice portals. Once enrolled in a network, which may charge an upfront fee as well as an ongoing fee, a supplier can send electronic invoices to any customer on the network.

However, such 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 to retain the business.

Meanwhile, as businesses 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.

As full e-invoicing requires 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 that provides a phased transition to e-invoicing, while enabling them to retain paper processes for some suppliers and buyers where appropriate.

A managed service provider takes full control of the invoice process. This process includes the manual capture of paper invoices and document scanning, the handling of a diverse range of invoice receipt formats such as XML, CSV, EDI, fax, email and paper, and the sending of invoices in a buyer's preferred format. The provider develops, maintains and operates the software, with customers paying a fee per transaction, enabling lower costs.

Outsourcing the entire invoice process

Those businesses in the e-invoicing vanguard are already reaping the benefits. Ricoh, a provider of such services, cites the example of a sportswear manufacturer that operated an expensive and inefficient invoicing process. Mailing 4.5 million paper invoices and statements a year, it outsourced its entire invoice process, planning to transition from paper to electronic invoicing over three years.

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 €3m.

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

E-invoicing will be a major factor in making the process more efficient for many businesses. Those that start now will be ahead of the game as the e-invoicing market steadily builds towards critical mass.

Quocirca is a user-facing analyst house known for its focus on the big picture. Made up of experts in technology and its business implications, the Quocirca team includes Clive Longbottom, Bob Tarzey, Rob Bamforth and Louella Fernandes. Their series of columns for seeks to demystify the latest jargon and business thinking.