In these times of economic uncertainty, there are many reasons a company may want to implement e-Invoicing processes with both their suppliers and their customers.
Let’s start out discussing why a company may want to consider implementing outbound e-Invoices with their customers.
- Reduced handling costs
- Reduced printing and postal costs
- Reduced archiving costs (paper storage)
- More environmentally friendly (Go Green)
- Reduced DSO (days sales outstanding)
- Reduced cash conversion cycles
- Compliance with local tax authorities
- Reduced billing disputes
How does a company implement e-Invoicing with their customers – outbound e-Invoicing ?
Here is a plan:
- The company must notify their customers that they want to implement an electronic invoice process with them and get their agreement. This is typically initiated via a letter and/or email sent to the accounts payable department of the customer.
- The notice should request that the customer read and agree to the terms of an online agreement form, and then register to participate.
- Once the online form is completed and the customer agrees to accept invoices electronically, the agreement should be automatically emailed to the customer for safe keeping. The agreement can be either an online click through agreement or be based on physically signed paper.
- The online form should also include a survey of the customer’s electronic data exchange (B2B) capabilities: can the customer exchange EDI or other B2B data formats, or do they want to exchange invoice information only via a web portal?
- Once the customer is ready an email should be sent to them with a link to a secure website where they can login and view current and past invoices. This reduces the customer support and accounts payable workload. The portal should allow the invoice sender to see when their customer’s read and/or download the invoices. Unread invoices should be flagged and the company alerted that more customer training may be necessary.
- In countries that use a VAT (valued added tax) system e-Invoice processes must guaranty authenticity and integrity. This can be achieved via secure exchanges like EDI or via e-Signatures in compliance with local tax authority regulations. In any case the invoice receiver must validate and archive the invoices. For e-Invoices that contain a digital signature specific validations* are required. The good news is that portal based solution can execute this service on behalf of the receiver along with the also required archiving. The length of time that electronic invoices must be archived differs widely depending on local regulations. It is often from 5-10 years starting with the end of the calendar year in which the invoice was sent.
- If the customer is a high volume customer and can support EDI or other B2B data exchanges then the portal may be useful to check on the status of invoices, but a fully automated B2B process may be more efficient.
*) Specific digital signature validations: e-Invoice portals should enable your customers to verify the integrity of the digital signature on their behalf. Therefore integrated functionality can exist to confirm that the invoice content has not be altered and to send a verification request to the digital signature authority and receive a response (OCSP – Online Certificate Status Protocol) which is then stored in a verification protocol as part of the archived invoice. This ensures that the invoice on record was valid at the time of receiving and satisfies the long term archive requirements.
Now on to the topic of implementing the exchange of electronic invoices with your suppliers – inbound e-Invoicing – similar portal based technology can be used. Here are key issue that become addressable:
- Large companies often receive tens of thousands of paper invoices monthly. These must be received in a mail room, opened, organized and moved to the appropriate processing centres where the invoices are manually read and the data entered into the accounting system. Many large companies receive invoices in dozens of different locations where this process is repeated. The manual processing of invoices can be a huge expense.
- Unprocessed paper invoices prevent management visibility into the true state of liabilities.
- The longer it takes to process an invoice, the more customer service and accounts payable issues arise.
- Unprocessed or slow processing of supplier invoices prevent companies from realizing early payment discounts that may be offered by suppliers.
- High dispute resolution handling costs
It is important to note that not all problems with supplier invoices can be solved through EDI, B2B or other forms of electronic invoicing. These are process challenges that often need to be corrected before the full value of electronic invoices and accounts payable optimization measures can be realized.
- Consider the consolidation of disparate software systems into one ERP
- Define and implement formal invoice approval work flows
- Consolidate management of invoice receipt into shared service centres
- Use a portal solution that can address integration efforts for all supplier sizes from an technical integration standpoint and in correlation to the amount of the to be exchanged invoices
- Implement an electronic payment system
- Consider how a consultant might help you manage through this sort of process change
General advice: get started today, the solutions are ready to deliver the expected business value but ensure that the selected solution will be able to adapt to the ever changing requirements in these new arena of electronic data exchange