How do you define eInvoicing?
It’s pretty obvious that an eInvoice is, well, an electronic invoice. But there are a lot of misconceptions surrounding eInvoicing, and it goes well beyond just replacing paper as businesses must change their processes and systems to maximize the benefits of eInvoicing.
Ardent Partners defines an electronic invoice as “one that originates digitally and remains that way without the use of any scanning or data capture support.” A true eInvoice is touchless, meaning the process is fully digitized and automated.
Simply put, both the buyer and supplier experience tremendous time and cost savings with electronic transactions.
- Efficiency: A competitive business environment increases need to cut costs and increase efficiencies. eInvoicing has the potential to eliminate manual data entry, time-consuming routing of hard-copy invoices, and chasing down executives for signatures and approval results.
- Adequate cash flow: Control over payables are critical to maintaining liquidity and sustaining business operations.
- Early payment discount capture: Can be automated and maximized, and reduction in the P2P cycle time enables more opportunities for discounts.
- Accuracy: Reduce errors via validation rules configured into automation solutions, also adding into overall efficiency of AP.
- Transparency: Having all eInvoice status information visible to the supplier reduces time spent on managing supplier inquiries and allows more time for strategic AP activities.
- Reduced costs: Supplier no longer have to print and mail their invoices, saving them costs in materials and time processing these invoices.
- Fewer errors and disputes: Suppliers can flip POs into invoices, create non-PO invoices using web forms, or submit invoices directly from their AR systems. Buyers no longer need to manually create an invoice, which reduces the potential for errors, cutting down the invoice processing cycle time.
- On-time payments (and even early!): With speedier invoice processing and approval cycles, suppliers get paid faster--and sometimes earlier.
- Improved ability to forecast: Having access to real-time data around submitted invoice status, payment, and more adds a level of predictability and visibility to a supplier’s AR process.
- Accelerated Payment: Submitting eInvoices reduces the buyer’s processing time. If an early payment discount program is in place, the faster an invoice is approved, the sooner the supplier has access to cash.
What eInvoicing is NOT:
Contrary to popular belief, not all non-paper invoices are considered a true eInvoice as they still bring inefficiencies to the AP process. eInvoicing does not include the following formats:
- Paper (If you can hold it in your hands, it’s not an eInvoice!)
- Scanned/imaged paper invoices
- OCR'd paper invoices
- Emailed PDFs
Common Barriers to eInvoicing
With a proess change like implementing an eInvoicing solution comes its challenges. In the 2014 PayStream eInvoicing Whitepaper, AP and Finance professionals revealed the top three challenges faced for an eInvoicing program are supplier resistance, the belief that current processes work, and a lack of budget.
- Supplier resistance: Removing paper from Accounts Payable processes also requires suppliers to adopt a new system and implement processes in their own businesses. In the whitepaper, companies listed supplier resistance as the top barrier to eInvoicing. Not surprisingly, the top challenge in the invoice management process involves receiving a majority of invoices in paper format.
To overcome this particular barrier, buyers typically implement a dynamic discounting program that allows the supplier to be paid early in exchange for a discount. This way, suppliers see value in submitting their invoice electronically--to get paid early and have faster access to cash.
- Current processes work: eInvoicing can transform a whole enterprise, and the belief that current processes work is both a common barrier and misconception. Keeping processes the way they’ve been for years can seem much easier than adopting a new system and streamlining current processes.
- Lack of budget: While an eInvoicing solution isn’t free, the cost and time savings by far outweigh its price. The average cost of processing an invoice is $14.21. Multiply that times the number of invoices processed per month, and you can immediately calculate the price of not using eInvoicing.
Also, as stated above, dynamic discounting can be implemented alongside eInvoicing, allowing buyers to offer discounts on all invoices. The money saved here can not only fund an eInvoicing program, but add millions to the bottom line.
Who uses eInvoicing?
eInvoicing is most popularly implemented in large corporations (think Fortune 500 and Global 2000 organizations), but adoption in small and medium enterprises is increasing year-over-year.
More and more companies are seeing the benefits of eInvoicing, with 26% seeking to begin an initiative over the next few years, while another 36% aim to increase their amount of eInvoices received.