Why Won’t Suppliers Adopt E-Invoicing? The Truth.

 

For many years we have heard that e-invoicing will completely remove the need for paper invoices, OCR will die and that suppliers and buyers will all adopt e-invoicing. Yet, according to Billentis, as of early 2018 it was reported that 90% of all invoices globally were still processed manually. So what is the truth of this?

Despite this incredible percentage, many organisations are still claiming that e-invoicing is the Holy Grail of Accounts Payable automation, despite the fact that in every country (let alone every business) there are different descriptions and requirements for what constitutes e-invoicing.

Defining E-Invoicing

There have been many attempts to specify what constitutes an e-invoice, unfortunately many of these definitions have simply not been taken on by business, or have fallen by the wayside.

In 2014, e-invoicing was defined by EU Directive 2014/55.EU as “an invoice that has been issued, transmitted and received in a structured electronic format which allows for its automatic and electronic processing”. However, this definition gained very little support in the wider European community, despite being a pretty clear definition.

In 2017 our industry woke up to the legislative change that was about to impact us: Duty to Report Payment Practises. As part of this legislative change the UK government attempted to define e-invoicing again, this time as; “This is where suppliers can electronically submit and track invoices. It’s not just allowing suppliers to email them an invoice.

In fact, it is virtually impossible to really define what constitutes true e-invoicing, let alone understand why suppliers so rarely engage with these systems and tools when they are asked to. On the face of it, moving to an e-invoicing process should be a no-brainer.

The reductions in cost, waste, environmental impact and time that can be made by removing manual processes and pieces of paper should be enough for anyone. And yet, despite the hype, e-invoicing still makes up a very small percentage of all invoices that are processed.

For E-Invoicing To Work Invoices Must Be In A Structured Format

And this is the first hurdle, although not insurmountable for some organisations.

In order for the entire P2P process to be automated, and manual touch points to be completely eliminated, it is vital that the information is created, managed, retained and processed in a structured way.

There have been some great moves forward on this, particularly in countries that have moved from a post-audit VAT process to a clearance model. However, the number of countries that follow this model are few, and the countries that are trying to move towards it at the moment are focusing their efforts on business to government invoices or bills (B2G) only.

Another way in which to move a part of the process towards e-invoicing is using a file that already exists in many ERP’s / accounting solutions. The likes of Oracle, SAP and Dynamics already generate a readable PDF document when an invoice is raised, this file format can easily be machine read thus removing some of the manual steps to process. However, this file still needs to be found, extracted and sent, this may not be much easier than sending an e-mail invoice unless you have a piece of technology to automate this, or extract the file.

In the UK it is very rare to find an organisation that has managed to convert the majority of its suppliers to e-invoicing, simply put, invoices in the UK are, at best, semi-structured documents.

Even in France, where invoices must follow a certain format and structure, e-invoicing  still makes up a tiny proportion of the total number of invoices that are processed.

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Is E-Invoicing Simply Passing The Buck?

Possibly, at least that is often the way it appears to people. But the same can be said for many supplier portals that exist on the market. And perhaps this is the truth of why suppliers won’t adopt e-invoicing when it is pushed onto them.

On the one hand you are offering your suppliers a way to do business with you that is faster, safer and better for everyone (which should make it very appealing).

On the other, you are asking that they change their processes, or they carry out the job of uploading information and data, or that they log into portals and manage the process themselves in order to get paid for the service or product that they have already created and supplied (now it doesn’t seem so appealing, right?).

If you have the buying power of a big multinational organisation, or retail group, then you will likely find that the companies who supply you are willing to do the extra work in order to continue the relationship and ensure their income. In fact, in a previous life, this directly impacted me when supplying staff events to a well-known retailer.

For many organisations though they simply do not have the buying power, or commercial clout to enforce these sorts of changes. The result? Only some of their suppliers will proactively engage in an e-invoicing or supplier portal based process.

To put this into context for many of you reading this, if you were to contact BT, British Gas, your local District Council and ask them to change the way in which they issue invoices, just for your business, what result do you think you will have?

Technology Doesn’t Stand Still

In fact, what we see happening across the market is more and more investment into technologies to help offer flexibility to organisations, not a 1 size fits all mentality.

This isn’t to say that there cannot be any success in an e-invoicing initiative, there can be.

Instead true e-invoicing is simply one part of the whole, offering supplier portals, e-mail capture, PDF capture and paper capture allows for the flexibility for your suppliers to engage with your organisation in the way that best suits them.

Of course, we would recommend that every effort is made to move your suppliers to some form of digital exchange, but consider who you do business with and what the benefit is to them as well as to your own organisation, and consider a platform or solution that supports this mentality, you will likely get better results in the end.

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Post by John Stovold

Responsible within ITESOFT UK for the support of creating and delivering new content, John has worked in B2B environments for more than 10 years. He has established himself as a true thought leader within finance automation, robotics and AI striving to deliver key messages to both senior, and middle management. John’s experience of working closely with business management has given him the ability to provide key insights into business challenges, and how ITESOFT can truly help them.

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