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Sarah UKFast | Account Manager

E-invoicing designed to operate across borders

There are many highly topical issues surrounding the organisation and efficiency of work processes. Time-management is arguably the most common, but within this broad topic falls many similar skills such as prioritisation, delegation and communication, that all have an immediate effect on the efficiency of an organisation. The effectiveness of the workforce seems to be the main concern of companies analyzing and assessing their workers, but how can this efficiency be optimised when fundamentally it is often the processes themselves that are outdated and grossly inefficient? Of the many procedures that are undertaken in the back office on a daily basis, there is one that is remarkably inefficient, time-consuming and a large drain on a company's finances and resources: invoice processing. Removing Inefficiencies The reason that invoice processing is so inefficient is elementary: paper invoicing is labor intensive, uneconomical, error prone, outdated and expensive. In fact, paper invoice processing can cost between US$5 and $25 per invoice; in time lost due to postal delays, lost items, incorrect data entry on receipt, and multiple checks along the way. The subsequent delays mean that it can take weeks just to get the information into the buyer's computer system, leaving the buyer without a good view of commitments in the meantime, and with the supplier unlikely to be paid on time. The inefficiencies of paper based invoicing are clear, but why has it taken so long for electronic invoicing to evolve? There have indeed been many attempts to solve the inefficient nature of invoicing, but since there are no universal data standards and no uniform template, computers cannot communicate and the process is therefore hard to automate. For many years, business-to-business electronic commerce has been conducted through Electronic Data Interchange (EDI) and while this has been used for invoicing, it was proven to be expensive and difficult to implement. Few companies managed to automate more than 5 percent of invoice volumes. EDI was, however, an invaluable tool for demonstrating the benefits of paperless invoicing and set the foundations for the inception of electronic invoicing at a lower invoice processing cost. Traditional Solutions Another main obstacle preventing the adoption of electronic invoicing has been that, traditionally, e-invoicing wasn't allowed in all geographies; it was the E-Invoicing Directive in January 2004, which ruled that countries in Europe could legally accept invoices electronically. This was not, of course, without complications, however, as each member state chose to implement the directive in different ways, meaning that there are 29 different versions of the directive, making it extremely complicated for companies to navigate through the mine field themselves. Only a small number of solutions have emerged that enable businesses to send and receive invoices electronically -- without the need for hardware or software -- but, crucially, they are designed to operate across borders and enable all suppliers to participate. These are EDI, scanning and OCR (Optical Character Recognition). EDI is a point-to-point link that relies on standards and is expensive for suppliers. Scanning means documents are scanned and then entered into an accounts-processing system. This means that the paper is not eliminated at source and an additional touch point is created in the process. While OCR accuracy is improving, it is still not close to 100 percent -- which means that manual intervention is required to check data. Implementing electronic invoicing -- putting the theory in practice. OyezStraker's Story The OyezStraker Group is one of the UK's leading office products and business services companies, providing office supplies, furniture, litigation support and legal forms in order to help businesses maximize efficiency. By January 2005, following a growth in its business, OyezStraker Office Supplies UK (OSOS) noticed an escalation in the number of paper invoices that required processing. With this increased workload came the stress of trying to manage a growing number of supplier inquiries and reams of paper. It was clear that an alternative to paper processing was needed. OSOS had already successfully implemented EDI links with two key suppliers, but at a high cost, making this approach inappropriate for its supplier base of 1,500 vendors. In order to capture all 1,500 suppliers, OSOS needed an e-invoicing solution which was flexible and cost-effective. According to Andrew Mobbs, Financial Accountant, OSOS, "EDI is an expensive solution and requires significant IT resource to implement. It took OSOS three months to set up just one link -- so it was simply not scaleable." Having met with a number of solution providers, OSOS selected OB10 as its e-invoicing partner in March 2005. The OB10 service extracts invoice data directly from a supplier's billing system and sends it directly to OSOS' in-house ERP (enterprise resource planning) system -- eliminating the need to process, manually key-in, or store paper invoices. However, OyezStraker's decision to use OB10 was also largely based on OBIO's superior supplier enrollment capabilities, and its ability to work with suppliers of different size or technical sophistication. Positive Uptake by Month 3 Andrew Mobbs adds, "OB10 was the only vendor who could prove the effectiveness of previous supplier enrollment campaigns and who could guarantee a conversion rate of 70 percent of invoice volumes by month 12. We were also impressed by how easy OB10 made it for suppliers to participate." In March 2005, OSOS and OB10 began communicating the e-invoicing initiative with their suppliers. "We didn't make the use of e-invoicing compulsory," said Andrew Mobbs, "but we expect key trading partners to adopt the solution to maintain their 'preferred supplier' status. In some cases, and for new suppliers the use of OB10 is a condition of doing business with us. We also had a strong buy-in internally, which meant that our messaging to suppliers was consistent across the business." By month three of the campaign, OSOS began to see a positive uptake of OB10, which boosted the volume of invoices that were being received electronically to 20 percent -- an impressive result early in the campaign. When OSOS launched the e-invoicing campaign with OB10, the company had a number of key requirements. "Essentially, we were looking to increase control over our processes," commented Andrew Mobbs. "In the past we suffered from invoices getting lost or delayed in the post, which meant that we were dealing with a high number of supplier grievances. As we were handling large volumes of paper, we had poor visibility of invoices coming in to OSOS. OB10 provided an immediate solution to that challenge because we had guaranteed receipt of invoices and also there was complete transparency for suppliers. Simply put, receiving invoices electronically through OB10 is more manageable." The accounts payable team was the first to feel the benefits of e-invoicing. At the outset, OSOS had set a target refocus the purchase ledger team away from data entry and into more value adding roles. "By month three of the campaign, we were already receiving a large number of invoices electronically. This change freed up key members of the team to work in a more proactive way with suppliers, creating strategic relationships which would positively impact future purchasing. It fact, it created a real culture change," remarked Mobbs. Purchase Orders The second key driver of the campaign was to improve purchase order (PO) compliance. Previous attempts to encourage suppliers to use POs had achieved moderate success. With e-invoicing the process was significantly easier. Suppliers that are required to send POs are flagged in the system, and if they attempt to send an invoice without a PO it is immediately rejected and an error message sent to the supplier. "By kicking back invoices that don't contain POs, suppliers soon get the message that this is an important part of invoicing OSOS. We achieved PO compliance with OB10 users almost overnight," Mobbs stated. OB10 has also positively impacted procurement. "It's comforting for Procurement to know that invoices are guaranteed delivery and that suppliers can be paid on time," Mobbs continued. "This puts them in a strong position when it comes to renegotiating contracts. OB10 also provides a superior reporting capability which means that procurement can make more informed purchasing decisions." A deciding factor of OSOS' selection of OB10 was OBI0's track record in recruiting suppliers to the network. After nine months of the campaign, 50 percent of invoice volumes are being received electronically. This is expected to increase to 70 percent by month 12. Following the success of the campaign so far, OSOS has managed to reduce costs in its Purchase Ledger team by 30 percent, and is well on target to achieve return on investment (ROI) by month 11. OSOS is now promoting OB10 to a wider section of low volume suppliers, and the hope is to see paper invoice processing phased out almost completely in the coming months. The Way Forward Although many contributing factors conspired against e-invoicing (and certainly prolonged its adoption), it clearly represents the way of invoicing for the future. Buyers will benefit from an existing (and growing) global supplier network, as well as significant cost savings and rapid ROI gained through improved processes. Other benefits will include better reporting and forecasting, improved cash flow management, support for corporate governance, and the opportunity to leverage existing investments in ERP and EDI. Suppliers who choose to bill electronically can be assured of invoice delivery and immediate invoice processing (with fewer disputes), as well as cost-savings and improved cash flow. Source: E-commerce Times

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