E-invoicing has been a key factor in improving efficiency and reducing the cost of the accounts payable process, but it’s not a panacea. The varied formats of electronic transmissions have increased the complexity of compliance and adoption of e-invoicing technology as well as a company’s ability to utilize e-invoicing information. To overcome these issues and increase value, companies must develop flexible e-invoicing strategies that are supplier friendly and integrated with a business process automation solution that effectively streamlines the entire accounts payable process.
E-invoicing Nuances
The term e-invoicing means different things to each organization and has spurred several different definitions and approaches to electronic invoice transmissions. Many companies still consider the traditional process of electronic data interchange (EDI) to capture supplier data electronically and process bills as e-invoicing. Another general-purpose technology, XML (extensible mark-up language) has also helped companies facilitate data exchange and process invoices electronically but has not been very useful beyond a limited scope. More recently and more popular, the method of scanning paper document invoices and putting them online has made the process of e-invoicing more efficient. To a lesser extent, the sub-category of optical character recognition (OCR), which automates the extraction of data, is considered another aspect of e-invoicing.
Interoperability Poses Challenges
Since companies use a range of electronic transmission strategies, interoperability is one of the key obstacles to e-invoicing adoption. Electronic invoice service providers have reduced key obstacles of electronic format compatibility while introducing new obstacles around system integration and common invoice processes. The success of e-invoicing methods largely depended upon the ability of the organization to accept varied formats of electronic communication from its suppliers or mandate standards.
Some companies simply enforce compliance to a specified invoice structure to standardize invoices. Companies may successfully mandate that suppliers adapt to their data structure of standard invoices by not paying them if they don’t comply. This works to some extent for companies that have tremendous market share or a monopoly over a market. But, in most cases, it is unrealistic, and often short sighted, to force fit your partners to your proprietary methods.
Instead, companies should fix the real issue by utilizing an e-invoicing technology solution that offers an efficient means of capturing information that could serve a wide spectrum of invoice types. This would allow companies to be flexible on how e-invoices are received regardless of whether it’s by scanning, faxing, EDI, XML or an electronic transmission delivery service. It would keep suppliers satisfied and make working with partners easier. The second critical issue is that once e-invoice information is received, companies must be able to quickly interpret and act on that information so that they can pay suppliers and keep them happy. This requires e-invoices to be tightly integrated with a company’s common business process workflow.
Potential to Transform AP Process
E-invoicing should be tightly coupled with a business process automation solution that is integrated with a company’s back-office ERP system to deliver a streamlined end-to-end account payable process. In this way, when a company’s business process automation solution receives electronic invoices it could immediately make them accessible from both inside and outside the ERP system. Then, the business process automation technology’s workflow logic would automatically determine the appropriate routing of the invoice without requiring any interaction from the accounts payable staff. If a problem should arise with the transaction, the business automation solution would route the e-invoice and ERP transaction information appropriately based on the exception issue. This increases efficiency and reduces the chance of error because it eliminates the need to re-key or re-capture data coming from suppliers or other parts of the organization. It also helps to maintain the integrity of controls on a company’s financial system.
Leverage Best Practices
In addition, the powerful combination of e-invoicing and business process automation allows companies to apply business and application logic to leverage best practices. Utilizing both technologies, companies have the ability to evaluate invoice terms against supplier terms to determine priority of invoices. This reduces potential issues over service agreements and supplier satisfaction. It also provides companies the advantage of being able to “auto-code” invoices based on project, organization or contact information and assist with proper purchase order line matching if purchase order line numbers are not supplied. This helps companies maintain better management and control of invoices.
E-invoicing Elixir
E-invoicing has helped advance the automation of the accounts payable process and that is certainly a step in the right direction. More and more companies are realizing the efficiency and cost-saving advantages of e-invoices and have utilized some method for transforming manual, paper-based processes to more efficient, electronic methods. The challenge now for companies becomes choosing an e-invoicing strategy that embraces all formats of invoices and effectively leverages the value of the information contained within them for competitive advantage. By integrating e-invoicing more closely with existing business process automation technology, companies may have the elixir they are looking for to achieve a completely automated, electronic, efficient end-to-end process of receiving and processing supplier invoices.