Watershed Year For e-Invoicing

Electronic invoicing has been around for years, starting with electronic data interchange (EDI) and more recently with digitally signed documents and government specified systems (such as Brazil or Mexico). But for one reason or another, this very simple solution that optimises physical and financial processes offering compelling savings for both the buyer and seller, has failed to reach critical mass.

2013 has the potential to be the watershed year for e-Invoicing as there are four compelling drivers that will bring this technology forward:

Corporate supply chain risk strategies

Last year saw global corporates focus on optimising their B2B integration with trading partners through consolidation, new solutions and outsourcing. While this trend will continue, the next big challenge for these global companies is understanding and managing supply chain risk.

Geographic, political and country risk came to the fore with well know natural disasters, the Arab spring and the continuing sovereign debt crisis. Companies with operations internationally are re-evaluating how their supply chains function and how they can avoid the disruptions experienced by the hi-tech and automotive industries.

The other major risk to global supply chains is credit risk. The working capital challenge for small and medium companies is well publicised. With narrowing margins and reduced access to credit, many of their suppliers are looking to alternative finance methods such as ‘supply chain finance’ to avoid insolvency.

To combat these risks large corporate are beginning to process their physical and financial data within their B2B trading relationships to gain a better understanding of how their supply chains work. B2B generally, but especially electronic invoicing, will play a major role in supply chain planning and optimisation.

SMEs are easy to do business with

Large, small and medium companies tend to view the world differently. With their larger customers focusing on managing supply chain risk, small and medium enterprises (SMEs) have an opportunity to differentiate themselves over their competitors.

While differentiation through product and price are key factors, one area that will become essential to SMEs is the ease of which they can integrate and do business with their customers. This may seem a superficial statement at first glance, for example many analysts think there will be a hi-tech boom in Western Europe as global companies diversify their risk portfolio out of Asia. Why Western European countries and not the UK or the US – surely because the cost efficiencies are greater? But the ability to respond to customer demand and their rapidly changing supply chain strategies can be a key differentiator for suppliers outside of low-cost countries.

B2B integration has helped optimise the physical supply chain for many large companies and they continue to expand these programs across their entire supplier base. Purchase order acceptance, vendor managed inventory, advanced shipping notices and electronic invoicing are all symbiotic B2B methods that suppliers can leverage to make themselves more attractive to customers.

Of particular interest to me is supply chain collaboration through electronic invoicing, with clear tax rules in Europe, Latin America and the US the opportunity is there for SMEs to embrace e-Invoicing and integrate themselves into their customer’s supply chain.

An electronic invoice offers compelling cost savings to the buyer compared to processing a paper invoice, it also improves visibility and reduces the processing lifecycle. Not forgetting the cost savings to the supplier and the ability to offer dynamic early payment discounts through alternative supply chain finance. This is why companies such as Intuit, Sage and Exchequer are all investing in B2B e-Invoicing solutions embedded into their SME accounting software.

The emergence of the social supply chain

One of the innovative areas of supply chain collaboration is the social supply chain. Including supplier management, polling, project management and predictive analytics, the social elements of the supply chain have corporate wide ranging applications from corporate social responsibility through to change management.

But where does the social supply chain come from? Perhaps Facebook or LinkedIn? Definitely not, the social supply chain will be populated by existing B2B networks. Those suppliers that are actively engaged in B2B and electronic invoicing will have a natural advantage over their competitors as they collaboratively engage with their customers to understand their needs in a dynamic and on-going basis.

Leading solution providers are ensuring that any e-Invoicing solution is inclusive of these social elements, combining the value of B2B integration with the power of collaborative networks. Actively engaging with social supply programs is another way for suppliers to make themselves easy to do business with.

Continued government mandates

One of my predictions for 2012 was increased e-Invoicing adoption by governments. This has proven to be the case with Austria, Ireland, Russia, France, Kazakhstan, Macedonia, Norway, Greece and recently Azerbaijan confirming their public sectors will accept electronic invoices going forward. (however my prediction for India hasn’t quite panned out yet..!)

Brazil and Mexico both have government mandated systems for all domestic invoices and the deadline for compliance for both countries is this year, and it looks like other Latin American countries will follow suit creating a surge in global e-Invoicing volumes over this year and the next.

With the United States ramping up their program, Germany discussing a mandated public sector system and Portugal considering a Latin American e-Invoicing model, I can only think that this trend will continue as countries seek to make cost savings under austerity, or improve capture of tax revenues.

In conclusion

In my opinion these four drivers combined must propel 2013 adoption of electronic invoicing beyond the normal growth rates to ensure this is a common business activity. I would suggest that if e-Invoicing fails to go mainstream this year, then it will simply continue to grow for the next five years at existing growth rates of 3-5% annually, and from my perspective this will be an opportunity missed.

Nigel Taylor, Head of E-Invoicing at GXS, has 13 years experience in the e-Invoicing industry and promotes e-Invoicing on a national and European level. He is an influential member of several industry groups and a UK representative on the current EC multi-stakeholder forum on e-Invoicing.