It is universally understood that digitalizing business processes brings tremendous potential in terms of process quality improvements, enhanced visibility, and cost savings. One area where these benefits are especially apparent is invoicing. For this reason, transitioning from paper-based invoicing to electronic invoicing is a priority for most organizations.
But even though e-invoicing has a solid business case—up to 80% cost savings with a payback time of as little as six months—it’s full potential can only be realized when you optimize all aspects of your business communications.So let’s take a look at four high-level steps your organization can take to realize the full potential of e-invoicing:
Step 1: Centralize invoicing
Moving toward centralized invoicing processes, both for issuing and receiving invoices, is typically the first step that organizations—especially larger ones—should take. Because this is likely time consuming, it can be done in parallel with your e-invoicing initiative as long as you take long-term centralization goals into account as you begin implementing e-invoicing projects. It may not be possible (or desirable) for your organization to centralize every aspect of its invoicing operations, but generally, the more your invoicing operations are centralized, the better return on investment you will get in the long run.
Step 2: Increase the share of electronic invoices
The second step is to increase the share of electronic invoices within your total invoice volume. Achieving 100% paperless invoicing in the short term is typically not a realistic goal due to varying levels of maturity in the e-invoicing capabilities of your trading partners. Their willingness for onboarding can also be a significant barrier. However, all-electronic invoicing is the direction in which we’re headed and you should strive to maximize the share of electronic invoices through motivating, incentivizing and even pressuring trading partners to move from paper invoices to electronic ones.
Step 3: Raise the degree of process automation
Another step in your journey to optimizing invoicing processes is raising the degree of process automation. e-Invoicing should not be treated as an isolated activity as it is an enabler for a much wider scope of process improvements and cost savings. For example, a major hurdle in achieving full invoice automation is often the quality of data coming from companies’ systems. Insufficient data within the invoice message results in the need for manual exception handling, and the proportion of invoices that require this type of manual intervention is extremely high—31% according to one study. Knowing the requirements of trading partners and improving the quality of invoicing master data goes a long way in addressing this issue.
Step 4: Recognize that e-invoicing is the tip of the iceberg
Steps 1-3 are important for getting the maximum value out of e-invoicing, but automating and optimizing invoice processes typically returns only 1/3 of the total potential that financial automation presents. The rest can be realized by extending your perspective to cover the entire sales and supply processes, which enables automatic matching of orders, order confirmations, invoices and payments. When you recognize that e-invoicing is the gateway to a bigger picture of financial process digitalization and automation and not merely an isolated endeavor, then you’ve really tapped into something good!
By Martin Hellquist, Liaison Technologies Product Manager for European eInvoicing Services
(Want to learn more about e-invoicing? Join my upcoming March 31 webinar titled Embracing the Paradox of e-Invoicing: Government as Driver and Encumbrance.)