Financial Service Providers Extend the Online Supply Chain
Electronic invoicing and payments (EIP) is increasingly capturing the imagination of both large organisations and their financial service providers. Whether led by corporates or banks themselves, this core business process is changing the way companies and their trading partners do business. For corporate treasurers, cash managers and the accounts payable (AP) and accounts receivable (AR) functions, e-invoicing accessible through the online bank enables the benefits of straight through processing in the order-to-pay environment, from raising a purchase order to final payment reconciliation.
For some time, large manufacturers, wholesalers and specialists in physical supply chain management have been developing their own internal and partner e-invoicing supply chains. Now their financial service providers are joining in to extend the supply chain. In some cases, it is the banks that are leading the EIP initiative.
Siam Commercial Bank (SCB) is the first bank in Thailand to provide e-invoicing to the business community. The bank developed an electronic invoice presentment and payment (EIPP) service designed specifically for the needs of its corporate e-banking subscribers. It could be argued that adding invoice presentment was a logical extension to the range of existing e-payment services; but SCB has taken this further by positioning itself as the central hub of the end-to-end invoice supply chain. In this position, SCB is able to facilitate invoice delivery, payment options and settlement activities for all its subscribing customers, many of whom are trading partners and therefore both invoicers and payers.
Among SCB’s existing customer base are entire supply chain networks. One of SCB’s invoicing clients, for example, is an automotive manufacturer for whom SCB electronically delivers invoices to its trading partners or payers. These payers include other SCB customers, such as parts suppliers and retail sales outlets, which, in turn, have their own payers, e.g. auto repair garages. The invoice-to-pay chain ultimately extends right through to the end user, i.e. the retail customer who actually buys the car or other end product.
The invoice supply chain is not just a business-to-business phenomenon; SCB sees it as potentially having market-wide application. The process begins with the provider of raw materials who sells to a supply company, who in turn sells its goods to the manufacturer. It then moves on to the wholesaler and retail outlet with various intermediaries along the way, arriving at the end of the chain to the consumer – thus it is logical to extend the EIPP platform to support the entire end-to-end invoice and payment process from raw materials to finished goods to consumer, to facilitate all of the players in the chain – no matter how many parties may be involved.
Whether it involves a single payer or 15 different processes along the chain, one of EIP’s strengths is its ability to generate financial data for business intelligence. As the host of the invoice supply chain, the bank can leverage content to supply customers with near real-time end-to-end billing, invoicing and reconciliation information.
This business intelligence can also play a vital role in enabling corporate treasurers to leverage their cash management and liquidity positions. As an example, having an up-to-date overview of all invoices in the pipeline, value amounts, who is paying and their payment schedules is important knowledge when it comes to forward planning around the company’s invoice portfolio. From the AP/AR perspective, access to summary data on paid invoices simplifies the task of payment reconciliation and matching, with the benefits of saving staff time. The ability to provide detailed invoice summaries has great appeal for A/R departments that receive lump payments and who otherwise must then undergo the painstaking task of matching up hundreds of individual invoices against these payments.
In addition, EIP can enable all partner payment settlements to be processed more quickly, particularly because the same bank can handle all payments across the chain. This, in turn, means lower payment charges and a reduction in everyone’s AP and AR administration costs, amounting to savings across the board. For example, a large auto retail outlet may receive hundreds or thousands of invoices a month from its manufacturing and parts suppliers, all of which must be checked by line item (and potentially queried), data processed, put through an approval cycle, sent for payment and then remittance data matched against original invoices.
Automating the invoicing supply chain (which can only be done electronically) delivers various business advantages, from better cash management and customer relationships to a reduction of overhead and exposure to risk. It stands to reason that the more players linked into this straight-through chain, the greater the benefits. With payment providers acting as a central service host, whole downstream processes can be streamlined (e.g. tedious remittance matching), and a global supply chain can be created that integrates the trading partner network, their payment providers, end users and even esoteric types, such as forward invoice purchasers. The vision is an end-to-end e-invoicing chain that includes raising a purchase order, delivering the invoice, handling bill queries, approvals, payments (which involves a range of components, including authorizations, scheduling and choice of payment type) and final payment reconciliation, leaving only exceptions to be handled manually.
For SCB and other financial institutions, such as payment-clearing centres, which are taking up the role of hosting the invoice supply chain, there is potential for profitability and business growth. It can give rise to a new source of service revenue, tools for customer retention and, in an increasingly competitive market, it provides a unique route to customer growth.