E-invoicing as a Stimulus for European Businesses

The European Digital Agenda is the European Commission’s (EC) strategy to generate economic growth through better use of technology. Sitting at the heart of the Agenda are 100 planned actions to help Europe’s businesses and consumers better exploit new technologies in fostering innovation and economic and social growth, ranging from improving the EU’s digital single market to developing e-skills. 

As we look ahead to 2013, the year will mark a milestone for one key element of the Digital Agenda. From January 2013, all member states are required to pass legislation ensuring the equal treatment of electronic invoices (e-invoices) and paper invoicing, giving businesses freedom to choose the process that best meets their needs. This will remove one of the barriers to the European-wide implementation of e-invoicing, which currently does not have the same legal standing as paper invoicing in many countries. The eventual aim is that by 2020 e-invoicing will be the predominant form of invoicing in Europe.

But why is e-invoicing seen as such a key element to ensuring economic growth? According to the EC, a paper invoice costs an organisation €1.40 to process whereas an e-invoice costs only around €0.40. Taking the billions of invoices sent across Europe each year into account, this makes the successful roll out of e-invoicing a potential economic game changer. The EC Expert Group’s mid-term report on e-invoicing, published in 2009, notes potential annual cost savings of as much as €200bn across Europe through e-invoicing. This is money that could be redirected to activities that drive innovation, support business growth and contribute to a healthier economy.

Economic Benefits of E-invoicing

According to Quocirca’s report ‘E-invoicing: Ready for Prime Time’, commissioned by Ricoh Europe, an estimated five million European businesses sent or received e-invoices in 2011. As a separate report, ‘E-invoicing as an Opportunity in a Challenging Market Environment’ (Billentis, March 2012), notes this is still only around 15% of all invoices. It appears many businesses are still not taking full advantage of the benefits e-invoicing brings.

The most obvious saving is cost. Adopting e-invoicing removes the need for paper and postage, but the costs go beyond the obvious as improved document processes can improve the efficiency of the entire supply chain, save employee time and reduce payment time.

Not only can companies save through efficiencies from the lower cost of processing e-invoices, but they can benefit from improved customer retention. A Ricoh-sponsored whitepaper published this month by IDC, ‘Organisational Blind Spot: The Role of Document-driven Business Processes in Driving Top-line Growth ‘ reveals that 69% of respondents would be less likely to do business with a company that has inefficient or ineffective document processes.

Sixty percent said they would even be willing to take their business elsewhere, and 57% said they would actively tell others not do to business with the offending company. Improving customer facing document processes through initiatives like e-invoicing enhances the overall customer experience, which is crucial for customer retention and ultimately, revenue growth.

As well as the all-important cost and efficiency savings, e-invoicing is good for the environment. Estimates suggest that three million tonnes of CO2 emissions could be saved each year in Europe alone through a full transition to e-invoicing.

Making the Switch

So why don’t more businesses switch to e-invoicing? It seems that despite the obvious benefits, many European companies are not fully prepared, with a number of obstacles blocking the adoption of a fully digitised system. The main barriers appear to be businesses lacking the right technological expertise or capacity, limited trust in the security of digitised data, and the lack of acceptance by suppliers and customers who are not quite ready to let go of paper systems.

However, the emergence of managed services is beginning to break these barriers down. Managed services provide a hybrid approach to total invoice management to help businesses make a gradual transition to e-invoicing, by processing both paper and e-invoices based on buyer and supplier preferences.

A managed service of this type was recently adopted by a large sportswear manufacturer which outsourced its invoicing process. According to customer preference, invoices are now either uploaded to a web portal for online viewing, or printed and dispatched by conventional means. Through an intelligent invoicing service, customers are able to download and pay bills by logging on to the secure web portal. The number of paper-based transactional documents distributed on the manufacturer’s behalf is expected to reduce by 3.6 million per annum, saving €3m.

The Digital Agenda is on track to take invoicing to the digital age and the deadline for member states is looming. In just a few months, EU member states will have removed one of the barriers for businesses seeking to benefit from the enormous cost saving potential of e-invoicing. With the savings this can bring to businesses, and the economy continuing to be challenging for many, companies should embrace e-invoicing now to gain competitive advantage.

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