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Why do organisations make the switch to e-invoicing?




7 Reasons to Implement E-Invoicing

1. Remove the barriers that are associated with conventional paper based invoicing

Remove the barriers that are associated with conventional paper based invoicing
Heretofore, organisations have had to deal with large amounts of paper based
accounts payable (AP/Inbound) and accounts receivable (AR/Outbound) processes.
These have been shown to be inefficient (cost) and ineffective (error prone)
throughout most modern

business environments. While such processes are necessary to ensure that the
finance function can invoice customers
and collect revenues while at the same time meet it’s payment obligations to its
suppliers, time and time again it has been shown that such paper based processes are generally time-consuming
AND error prone. This is primarily due to the receipt (by post usually), sorting and
rekeying of invoice data and the reconciliation of the Purchase Order/Goods received
Notice and Invoice documents before a payment can be approved.

Such processes are rooted in traditional business practices. However inefficient
and ineffective they are, they still constitute the primary method of managing the flow
of cash into and out of the organisation. These are barriers to
implementing the changes necessary to move a business from a paper based invoicing
methodology to “electronic invoicing”. This not only promises too but
actually improves the efficiency and the effectiveness of invoicing processes
enabled using such technologies. E-invoicing is not new in the true sense of
the word – EDI (Electronic Data Interchange) has permitted many processes
(such as invoicing ) to be enabled within organisations where the invoice
data is captured (for example a suppliers invoice) and placed directly into
an organisations AP system for approval and payment.

However, EDI is now an ‘old’ technology in the sense that the internet and
the associated rise in cloud computing capabilities globally, offer a far
more cost-effective and richer exchange between the supplier and
buyer – “Trading partners” then EDI are, but with far smaller risk to the
organisation in terms of implementation time and supplier/customer
acceptance.

2. Automation improves processes and business efficiency

Financial managers and associated financial functions such as Credit Control, Accounts Receivable/Billing, Accounts Payable and Procurement are under increasing pressure to keep costs down, improve performance and service delivery (both internally in the organisation and externally to stakeholders). As such organisations are looking for solutions that automate key
processes, achieve ‘best in class’ practices, and improve operational
efficiency


Better processes produce lower (unit) costs, improve employee productivity and ensure
that stronger trading relationships are established. The ability to have key information with which to
continuously improve invoicing processes and gain incremental return on investment (ROI) on a consistent
basis is a major benefit of invoice process automation Of real benefit is the visibility and control of the payment & receivable processes that can be achieved. E-invoicing as the main tool with which to automate the invoicing processes can capture and collect critical data or key performance indicators (Debtor days, Credit note information etc) and make
that data available to facilitate further improvements downstream.

Key benefits include

  • Improved efficiency (Labour hours, throughput etc)
  • Increased productivity (“Doing more with less”)
  • Shorter cycle times (Improving the order-to-cash cycle)
  • Data consistency (Eliminate incorrect invoices and associated processing costs)
  • Corporate Governance and Compliance (Sarbanes-Oxley and Audit transparency)
  • Reduced costs
  • Stronger trading relationships (100% error free invoices paid and collected on time)
  • Lower risks associated with the management of (debtor) ledgers

3. Reduces costs and days sale outstanding (DSO) and provides a more transparent audit trail

While e-invoicing has benefits both upstream and downstream from the organisation, it
is the finance function in particular that will gain proportionally the greatest benefit.
Specifically, for the finance manager, e-invoicing offers many benefits including:

  • Provides a more transparent audit trail (even over past trading years as far back as 10 years)
  • Enables on-time payments from customers
  • Enables 2/3 way matching of Invoice with POD (Proof of delivery) and GRN (Goods received Notice)

Cost savings through a reduction in

  • Mail processing costs
  • Material and transport costs (Archiving, printing, envelopes, stamps etc)
  • Reduction in direct headcount costs associated with paper based processes
  • Eliminates confusion around the date the (correct) invoice was posted
  • Can guarantee that only invoices that are checked and correct are presented to the AP function/system
    for payment (100% error free invoices)
  • Reduction in Days Sales Outstanding (DSO)
  • Increase in Days Payables Outstanding (DPO) with supplier financing

4. Streamline back office administration and eliminate eroneous invoices

Many organisations fail to fully grasp the impact that their back-office operations (key organisational
functions that support the business in the provision of value to customers) – can have on their overall
enterprise efficiency. While various parts of the back office functional areas often deal
with order fulfilment, transaction processing, accounts receivable/billing and accounts payable,
inefficiencies in any one area often

create either upstream and/or downstream issues in other areas, greatly impacting the speed and cost
of transactions and indeed customer service levels.
The back office functions therefore offer tremendous scope for improvements that if implemented should
deliver higher quality products and services, faster, and more cost effectively.
e-invoicing offers excellent back office process automation opportunities.

Functional areas like
procurement, distribution, multi-level approval, payments and document archiving etc. can all benefit.
For example, e-invoicing solutions can automate the process of matching invoices with purchase orders
and delivery notes. This ‘3-way matching’ process helps to mitigate the risk of an incorrect bill
being paid for the wrong amount for the wrong goods! However because there are three distinct
documents required to be matched together (that originate from three different sources at three
different times), the risk of errors occurring is huge. By implementing the correct e-invoicing
solution, it’s possible for any organisation to reduce or indeed to eliminate
erroneous invoices.

5. Increased cash management and cash flow visibility

The OTC (Order-to-Cash) cycle is a critical process for any business. How quickly a buyer can
pay an invoice (and receive an early payment discount for example) and consequently a supplier
can get paid by the customer is often a critically strategic tool in the financial managers
armoury


By using e-invoicing to speed up the OTC, key financial indicators such as
DSO (Days sales outstanding) can be reduced. This improves cash management immediately.
Furthermore, because e-invoicing links together supply chain documents into a transparent
and more effective document chain, the additional benefit of improved cash flow visibility
becomes immediately apparent.

6. Contribute to the environment

Through the innovations of technology, e-invoicing has the ability to help grow and sustain a
greener future for our environment. Less paper means more trees. Looking at the conventional method of
paper invoicing, companies have to undertake a number of time consuming and environmentally damaging
tasks

Think about it;
The first step is to generate and print the invoice, upon printing; the invoice must be enveloped, posted, sorted, delivered and processed. Think of all the activities and materials needed and used in order to carry out invoicing; such as paper, ink, oil, labour resources, energy and time. Now imagine how much energy and resources a business could save just by switching to online e-invoicing.
Some interesting facts:

  • Potentially, 14 million trees per year can be saved upon the EU reaching full adoption of e-invoicing.
  • 1 million invoices equals approximately 130 trees, 20 tonnes of paper and 36 tons CO2.
  • A year’s worth of invoicing takes up as much landfill space as 10 football fields 100 feet deep.
  • The energy used to produce 1 invoice can be translated to powering a 40w lamp for an average of 30 days.