E-invoicing: The Ticket to A/P Efficiency

In recent decades, companies have devoted significant time
and resources to improving the efficiency and effectiveness of their accounts
payable (A/P) organisation. Given the current economic environment, where cash
is king and companies are looking for any and all ways to free up and maximise
it, many are stepping up their efforts – although few are succeeding.

With the large-scale implementation of enterprise resource planning (ERP) and
electronic data interchange (EDI) systems, A/P has certainly become more
efficient. Yet most finance executives remain unsatisfied with where things
stand. There is still too much paper and manual processing, filing and matching
involved to achieve the kinds of efficiencies and savings that they both seek
and need to weather these volatile times.

To remedy the situation,
many are warming to the concept of electronic invoicing (e-invoicing). With
increasing frequency, they are leveraging a new breed of solutions that enable
them to execute it. These solutions attack the inefficiencies that exist between
companies, such as sending and receiving invoices and payments, to enable more
effective collaboration. Delivered in the Cloud, they can be easily shared and
accessed among trading partners, allowing for common business processes in areas
such as billing, treasury and A/P.

They are also delivering results
across several fronts. The bottom-line impact of leveraging such solutions comes
through efficiency gains in A/P processing. It simply takes fewer staff to
process invoices with technology in place. There are also strategic gains driven
through more on-time payments, shorter approval cycle times, early payment
discount capture and the maintenance or extension of days payable outstanding
(DPO), among other benefits. 

Yet the A/P process remains highly
inefficient. According to industry analysts, more than 80% of
business-to-business (B2B) commerce transactions are completed manually and
companies still send 85% of invoices and payments on paper.

What’s
Holding Companies Back?

Why haven’t more companies automated the
process? Supplier participation is a key driver of success in any e-invoicing
initiative and many companies fail to invest the time and resources necessary to
target, on-board and maintain their partners. The legacy of EDI costs and
complexities may also be a deterrent, despite what are now much simpler methods
for submitting e-invoices.

In addition, country-specific regulations
in the European Union (EU) have resulted in leaders and laggards. This is
primarily driven by different levels and treatment of value added tax (VAT) and
requirements related to the storage of paper invoices.

For those
companies able to overcome these challenges, the benefits of e-invoicing
solutions are substantial.

When done right, e-invoicing can deliver
process efficiency gains, typically measured in terms of the number of invoices
processed per full-time equivalent staff. Organisations with more than 10
full-time employees dedicated to processing invoices have reported as much as
70% of the cost taken out. Other hard-dollar savings can be generated through
the capture of early payment discounts. Many companies simply cannot process
their paper invoices fast enough to capture early payment discount savings,
which can be significant. With e-invoicing, they can not only capture these
discounts, but ensure they materialise.

Effective e-invoicing
initiatives can also enhance working capital management. With improved
visibility and control, finance organisations can pay invoices on time and
ultimately stretch their payables to term, which has a positive impact on DPO.
Many companies are able to use the cash freed up from invoice efficiency gains
to fund discount programmes and the cash savings they generate to drive
operational improvements and strategic capital investments. This strategy also
helps provide needed liquidity to supply chains that are struggling under
today’s tight lending practices

Evaluation Checklist

Without question, e-invoicing can help A/P organisations take their
performance and efficiency to the next level. However, identifying the right
solution is absolutely essential to success.

When evaluating an
e-invoicing solution, companies should ensure that it:

  • Eliminates (not
    automates) errors at the source.
  • Permits suppliers of all sizes to easily
    and inexpensively connect.
  • Dramatically reduces the quantity of paper
    handled, stored and matched.
  • Improves supplier collaboration.
  • Matches purchase orders, receipts, and contracts to invoices.
  • Accommodates varying degrees of supplier sophistication.
  • Allows 100%
    capture of invoice volume.
  • Improves compliance across many dimensions,
    including contracts, preferred suppliers, and global e-invoice tax regulations.
  • Provides earlier visibility into cash requirements.
  • Removes
    latency in invoice and payment processing.
  • Reduces the volume of supplier
    inquiries.
  • Offers multi-lingual, multi-currency capabilities.
  • Provides global, localized support for the company and its suppliers.

Last, but not least, it should deliver measurable and sustainable
results that positively impact the company’s operations, and ultimately, the
corporate bottom line, including:

  • Compliance with negotiated vendor
    contracts to drive savings and eliminate fraud related to disbursements.
  • Opportunities for dynamic discounting, which helps buying companies reduce
    spend by maximizing discount savings and earning high-yield (e.g. 18%+)
    risk-free returns.
  • Detailed remittance statements to help suppliers
    reconcile payments, eliminate inbound inquiry calls and drive down cost per
    transaction.

With the right e-invoicing solution and partner,
companies can fundamentally improve an ancient business role and achieve new
levels of A/P efficiencies and cost savings. 

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