What is e-invoicing?
E-invoicing provides all of the same information you would find on a traditional invoice (supplier company, reference person, invoice number, order reference, tax ID, payment terms, etc.) but in digital format.
As more businesses digitize their processes, many businesses are taking advantage of the many benefits that e-invoicing offers.
Whether you have already swapped to e-invoicing or you’re considering making the switch, here’s our introductory guide to everything that you need to know.
What is e-invoicing?
E-invoicing, also known as electronic invoicing, is the exchange of invoice data between a supplier and a buyer in a “structured” format. The structured format allows an accounts payable (AP) receiving system to immediately understand each unique invoice field, to quickly begin the invoice processing cycle.
What is the e-invoice process?
Invoicing is a segment of the entire procure-to-pay (P2P) cycle. Invoicing starts only after a purchase order has been received, and depending on the terms of the delivery of the good(s) or service(s), the invoice may be sent at a later stage.
The purchase order is critical to the invoicing process as it outlines the terms of the purchase, including the cost, delivery and payment method agreed for the transaction. This clarity is essential and allows the transaction to move forward.
When the product delivers or the service has been provided, the e-invoice can then be raised and sent digitally. The vast majority of invoices are created with a net 30, meaning customers have 30 days to make the payment. This does, however, depend on the terms agreed between the buyer and supplier.
An invoice is issued, transmitted, received, processed and stored electronically using structured document formats, meaning everything is completed online and streamlined to enhance the entire process.
What are the challenges with traditional invoicing?
One of the main challenges associated with traditional invoicing is that they are incredibly time-consuming to create and process, with processing often taking as long as 20+ days to complete. With traditional invoices, whoever receives the data receives it in an unstructured format (ex. print or even an electronic PDF), requiring manual data entry – tying up valuable AP time and resources.
Businesses that use this type of system spend a significant amount of time manually handling and entering data, which can quickly become overwhelming if hundreds of invoices are received each day.
Tracking traditional invoices can also present a number of different issues, as paper invoices are not only easy to lose but they are also difficult to monitor. And finally, manual invoicing involves a higher risk of errors. Processing invoices manually introduces the human factor, which unfortunately introduces greater risk of error than AP automation software. However, humans are much better at other things, such as forecasting, analyzing cash flow, handling the complex invoice exceptions, etc.
How does e-invoicing work?
An e-invoice is an electronically created and delivered invoice, which is sent to a client or customer using a structured form that’s quickly accessed online and all fields are easily recognized by AP automation software. Once received, the invoice is forwarded to the payment stage, without requiring any human intervention. Containing all relevant information about the transaction, an e-invoice is automatically imported into your accounts payable system.
E-invoicing business benefits
Thousands of businesses, operating across a diverse range of sectors are already benefiting from the many advantages associated with an e-invoicing system. Here are some of the benefits:
- Lower invoice processing costs
- Fewer errors and exceptions
- Faster invoice processing and approval
- Better visibility into suppliers and spend
- Improved cashflow forecasting
E-invoicing software – What to look for
When you’re looking for e-invoicing software, there are many factors to consider to ensure you find the right software for your business needs.
Here are some of the things that you will need to look out for:
- What features does the e-invoice software have?
- Will the system automatically receive invoices? What about sending invoices?
- Does it support all invoice formats?
- Can it integrate with your existing ERP and/or other financial systems?
- Can it provide analytics for insight?
How to choose an e-invoicing solution provider?
There are many e-invoicing solution providers out there, so when choosing the best option for you, it’s important that you do your research to determine whether or not they can meet the invoicing demands of your business.
Here are some key things to consider:
- Technical capacity
- Level of security offered
- E-invoice compliance
- Technical support
- Customer testimonials
How to implement e-invoicing into your business?
If you’re looking to implement e-invoicing into your business, there are several key elements that you will need to keep in mind to ensure a smooth transition. Read our ebook, “6 Things to Keep in Mind While Implementing e-Invoicing” for everything you need to know when putting together an e-invoicing implementation plan.
At Basware, we provide e-invoicing solutions for both buyers and suppliers, allowing you to eliminate paper invoices and processing costs from your payables operations with the Basware Network.
To find out more about how we can help you with your e-invoicing needs, please get in touch. Our experienced team is always on hand to answer your questions to kickstart your e-invoicing journey.