Think your suppliers won’t adopt true e-invoicing? They will now.
Tuesday, 13 Mar 2018
Senior Presales Consultant
90% of all invoices worldwide are still processed manually – but not for long. Read how top performing companies are already targeting e-invoicing rates of 90% or above.
I may be going out on a limb, here, but in this day and age when everyone is glued to digital devices, and we can book an Uber or turn up the heating just by yelling at a smart speaker, this must surely be the decade in which we declare the paper invoice officially dead.
It’s staggering that organisations are still so wrapped up in paper-based back-office processes when they have so conspicuously benefited from digital transformation of front office operations like marketing, sales and customer services. According to e-invoicing market stalwart, the Billentis Report, more than 90% of all invoices worldwide are still processed manually. Let’s think about that for a moment: nine out of ten invoices are still made out of cellulose and carbon black.
In 2010, the European Commission set out a lofty goal for e-invoicing to become the dominant method of invoicing within the EU by 2020. The trouble is, every EU member state has a unique approach to dealing with e-invoicing, resulting in a patchwork landscape of national mandates – hardly conducive to cross-border trade. In fact, it is in the business-to-public sector market that encouraging signs are emerging, with e-invoicing becoming a cornerstone of the digital agendas advanced by governments, although there is still a yawning discrepancy between intention and reality.
When is an e-invoice not an e-invoice?
There is a diverse range of solutions being put in place to tackle paper invoicing, but not nearly enough support for e-invoicing as defined by EU Directive 2014/55.EU which refers to “an invoice that has been issued, transmitted and received in a structured electronic format which allows for its automatic and electronic processing”. The crucial word here is “structured”, which leads me neatly on to my next rant: OCR and PDFs.
OCR solutions involve taking a paper invoice, scanning it and turning it into an image. The invoice content is then extracted using optical character recognition. This form of digitisation is a popular, interim solution (some would say quick fix) which yields some savings in terms of handling paper invoices, but much of these savings are offset by introducing a new cost around ownership of the OCR technology. Even if you outsource the scanning to a third party, what you end up with is still not a structured e-invoice. And the accuracy of invoice content remains a problem with OCR – typically 20-30% of invoices have to be treated as exceptions in one form or another, resulting in high processing costs.
What’s more, the majority of organisations that receive image-based PDF invoices by email admit that they print out hard copies (yes, really!), cancelling out all the advantages of PDFs except saving the supplier the cost of an envelope and a stamp. At best, processing PDFs as unstructured e-invoices is cost-neutral; at worst, it actively adds cost to the overall process. So it’s worrying that across most of Europe, excluding our more enlightened Nordic cousins, PDF invoices still account for around 70% of all electronic invoices.
This isn’t even close to the holy grail of e-invoicing whereby an invoice goes from creation, to delivery, to approval, to payment without a single piece of paper being involved – a “touchless” machine-to-machine journey. But the truth is that invoice scanning and OCR have been a sticking plaster for organisations that couldn’t persuade enough of their suppliers to switch to a truly electronic method of submitting invoices.
A simple/clever hack to put the “true” into e-invoicing
A large proportion of emailed invoices are created using accounting software such as Quickbooks, Sage, Microsoft, Oracle and SAP. But I’ll let you into a secret – these systems also generate a readable PDF document, and that’s the game-changer.
Unlike PDFs that are merely an image of a piece of paper, readable PDFs have a structured text file embedded in the document. And here’s the important part – that data file can be machine read, mapped and converted into a true e-invoice.
I’ll spare you a deep-dive into the tech, but the point is that this allows recalcitrant suppliers who don’t want to change their current processes and practices, or pay fees to an e-invoicing network, to send the same files they send you today. The invoice can be transformed, validated and imported into your AP process without any human intervention in a matter of minutes using readable PDF invoices.
Because this technology makes it possible to get buyers and suppliers on the same page, it effectively means OCR can – and I daresay will – be replaced by machine-readable PDFs and structured data. Admittedly, paper and OCR won’t be going the way of the dodo just yet – there are scenarios where OCR still makes sense, but these are few and far between. In truth, most companies should be able to reduce paper to less than 5% of their total invoice volume.
Getting suppliers on side and on board
E-invoicing isn’t a silver bullet, but if you can offer your suppliers more options to send invoices the way they want, adoption rates grow exponentially. Put yourself in the supplier’s shoes for a moment:
“My customer is asking me to send the same file I send them today. I do not have to pay anything to do so. I know my invoice is getting directly into my customer’s approval process, and not sitting on a desk somewhere. I can log into a portal at any time and see the status of my invoice (for free). Now that I am sending something that my customer can process electronically, my invoice can be processed faster, leading to opportunities for dynamic discounts and early payment programmes.”
You can see how this becomes a simple solution for suppliers to say yes to, practically and culturally. The 2017 Billentis Report estimates that suppliers can save anywhere from 60% to 80% through e-invoicing adoption – not to be sniffed at.
What’s in it for buyers?
On the buyer side, there are huge benefits as well. Lost invoices become a rarity (because they go straight into the AP process). Manual data entry and OCR processes become irrelevant. People who once spent their day mired in tedious, repetitive tasks can be repurposed to focus on strategic themes such as removing bottlenecks and managing category spend.
Then, of course there are the cost savings. Manually handling invoices costs time and money. Various benchmarking studies by Billentis, CIPFA and iGov have found the cost of manual invoice ingestion varies wildly, from £4 to £25 (€4.48 to €28) per document. Obviously, each company calculates the number differently, but nonetheless it is a major drain. The prospect of reducing this to mere pennies or cents is undeniably attractive.
Never shuffle a paper invoice again!
Eliminating the change and cost a supplier faces is key to moving away from a paper-based process, and I’m not ashamed to say that’s something Basware does better than any other e-invoicing provider in the market.
To find out more about how Basware PDF e-Invoice receiving can give you straight-through invoice processing and get suppliers on board effortlessly, click here.