Ken Clark, Director, Product Marketing, Business Network Cloud at OpenText
Invoicing is one of those business processes that has proved oddly resistant to the march of digitisation. Or, at least, partly. While many businesses have been moving towards some form of electronic invoicing for a while, studies have found that 80% of finance and IT leaders at medium and large-size enterprises are still frustrated by the need to manage paper records. [1]
Perhaps part of the reason for the slow transition lies in e-invoicing being seen as a ‘nice to have’, as opposed to an essential process.
This is not helped by the fact that many countries, the UK included, have no overarching e-invoice mandate. At this time, it is only mandatory for UK companies to use e-Invoicing with the NHS. All other public sector bodies introduced what’s effectively a “soft mandate” where the government agency is obliged to accept e-Invoices if they meet the published specification but suppliers are not mandated to issue e-Invoices.
This has seen the slow creep of a patchwork quilt of invoice processes and approaches. But more and more mandates are being introduced. In a December 2022 publication, the European Commission proposed to make e-invoicing mandatory for intra-Community flows as early as 2028, and more than 80 countries worldwide already have some form of e-invoice mandate in place. Around 50 have announced their intentions to do so.
So, organisations must get ready for mandatory e-invoicing or face being on the back foot when those mandates come in. But this should be viewed as an opportunity rather than a burdensome obligation.
3 reasons to convert to e-invoicing by default
Simplicity
As tax authorities seek to focus more on VAT/GST compliance and tax reporting, they are harnessing advances in digital technologies to improve visibility and control. One of the key methods is mandating real-time or near real-time e-Invoicing.
Unfortunately, there has been very little standardisation of models, platforms or technologies used in national governments’ e-Invoicing compliance regimes. This has led to huge complexity for businesses to manage when it comes to e-invoicing. But a robust, global electronic invoicing solution can offer greater traceability than paper invoicing and can be secured to guarantee the integrity and authenticity of invoices. These usually include a secure electronic backup, accessible online to the tax auditor from an intuitive web interface. This makes the process of recording, tracing, verifying and submitting accounts much simpler and more reliable.
Cost
Return on investment for any new tech solution is top of mind for CFOs right now. Luckily, e-invoicing has a proven significant impact in reducing costs through automation, improving human resource productivity, and reducing commercial and administrative costs[2].
The cost savings offered by e-invoicing can only be achieved with a fully automated invoicing approach. Electronic invoicing on PDF eliminates very few costs on the supplier side; and while this format is accepted for tax purposes, it offers few advantages to companies compared to adopting e-invoicing via end-to-end processing automation.
Speed
The automation inherent within modern e-invoicing solutions enables companies to process much larger volumes of invoices, with little need for error-prone human intervention. Some studies out there show that the average error rate for manual data entry is about 2%. That might seem small, but it compounds over time, with the potential to lead to significant financial losses. When it comes to regulatory obligations as well, total accuracy is vital.
Companies with fully automated electronic invoicing processes are able to get paid sooner and pay their suppliers more quickly. These indirect benefits can be crucial, sometimes outweighing direct savings on operational costs.
Overcoming the technical obstacles to e-invoicing
According to the IDG survey cited above, the main obstacles to adopting full automation of billing processes are data security (54%), integration with internal systems, e-procurement (45%), perceived complexity of the technology (36%), lack of expertise (32%) and integration with customers and suppliers (30%). In addition, 42% of professionals have billing processes that are compartmentalised by geographical area, department or information system. So, the main obstacle for companies is the integration of electronic invoicing into existing IT infrastructures.
In light of this, perhaps the best approach for companies looking to get ahead of the game on e-invoicing is to find a robust solution provided by a vendor offering greater technical support and expertise, in order to speed up and streamline that integration.
Get ready for global mandates
The regulatory landscape around e-invoicing may be patchwork at the moment, but all signs point to more global mandates ahead. Regardless, the direct and indirect benefits of e-invoicing mean that companies shouldn’t wait until they’re made to adopt it – indeed, there’s a real opportunity to grasp by making the move now.
Companies lagging behind in adopting e-invoicing will miss out on the opportunities offered by streamlining and eliminating operational costs, as well as improving cash flow. The risk is that they will lose their competitive edge to companies that are already benefiting.
[1] IDG MarketPulse, E-Invoicing’s Time Has Come, 2022
[2] 2022 Gartner report
