Electronic Invoicing:A Solution or an inconvenience?

Within the last decade it has been noted that Organizations in both private and public sectors are gradually transitioning their  transaction invoices from paper-based to electronic based invoices also called E-invoicing which is transmitted over the internet. In this article, we will discuss E invoicing, how it functions, and its benefits

Electronic billing also known as E- invoicing is the electronic delivery of invioces (bills) and related information by a company to its customers. Electronic billing is referred to by a variety of terms including the following: electronic billing, electronic bill presentment and payment (EBPP), electronic invoice presentment and payment (EIPP) as well as e-billing and e-invoicing. It is an essential part of an efficient financial supply chain and it links the internal processes of enterprises to the payment systems

Put simply, e-invoicing makes life easier. It takes complex paper-based processes by helping create, send, receive, and archive invoices with a fraction of the time and cost of traditional paper-based methods and ensures transparency in operations.

E-invoicing systems can provide a comprehensive solution to the problems associated with large volumes of paper invoices. Traditional paper-based billing processes are inherently vulnerable to errors, particularly when staffs are deluged with high volumes of invoices, potentially leading to problems such as missed, duplicate, or unauthorized payments. Paper-based invoicing systems based on multiple staff approvals are also prone to unnecessary payment delays.

Many companies’ first step towards e-invoicing is simply to scan all paper invoices received or to create supplier/client point-to-point invoicing systems. However, centralized, hub-based e-invoicing systems soon come to the fore, supported by legislative changes and the development of e-invoicing standards, typically based on XML (extensible mark-up language) computer code. The design and implementation of an e-invoicing system largely depends on the firm’s unique needs, in terms of factors such as invoice volumes, currency conversion needs, approvals process, and the level of integration necessary with other existing management information systems. Another key determinant of successful development is, frequently, the adoption of an e-invoicing system partner with the experience and resources to customize e-invoicing solutions to fit companies’ highly specific needs. Among other advantages, e-invoicing system specialists can help clients to overcome compatibility issues between payment system platforms, by supplying a payments hub system with an interface that can be adapted to clients’ specific needs.

BENEFITS

Some of the key benefits of e-invoicing are

• Improve the cash cycle by getting invoices to customers faster
• Improve relationships and lower administration costs with suppliers
• Improve visibility of cash flow, collections, and invoice approval
• Organize the invoicing process more efficiently, from production to distribution to on-going management
• Reduce paper usage and energy consumption

Disadvantages

• E-invoicing systems can be expensive to introduce, with the necessary investment only recouped if a threshold volume of invoicing makes use of the system.
• There is no universal standard in e-invoicing systems; each company’s precise needs are distinct.

• The supplier can sometimes have little short-term incentive to participate in e-invoicing systems, given that the potential cost savings tend to arise on the buyer side. However, in a competitive environment, suppliers can feel under pressure to comply, to retain the business

Action Checklist

• A company and its chosen system partners should liaise closely with clients and suppliers when designing and implementing systems—the full benefits of e-invoicing are only achievable if the system is used close to its maximum capacity.
• Ask chosen system partners to work with any suppliers holding out for paper-based invoice submission—some e-invoicing hub operators can supply software to help with the transition.
• Consult financial advisers over tax considerations ahead of implementing an e-invoicing system. Legal advice in particular jurisdictions is also advised.
• Explore how the implementation of e-invoicing systems could improve your company’s competitive advantage, for example, new efficiencies might enable your sales team to win new business ahead of alternate suppliers.

Dos and Don’ts

Do

• Once your basic e-invoicing system is operational, use the system initially for internal clients to help identify any outstanding post-testing problems, before exposing external clients to any possible gripes.

• When assessing the cost of introducing an e-invoicing system, consider how a well-run system could help to improve the quality of input to wide management information systems.

Don’t

• Don’t use e-mail invoices as input to your e-invoicing system as this can expose the network to viruses. Invoice-related communications are best accepted via a secure, closed network.

• Don’t choose an e-invoicing system based purely on initial costs. Internally developed systems may appear cheaper initially, but may prove costly in terms of reliability and compatibility issues, while general IT supplier companies may lack relevant specialist e-invoicing and payment systems experience.

As more companies are looking to cut costs, electronic invoicing is presenting itself as a viable time and cost-saving alternative.

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