The Case for Open Business Networks
Of course, not all business networks are created equal. To reap the full benefits that they can provide, corporate treasury must find an open network that both the company and its trading partners can connect to, regardless of the backend systems being used. Then, and only then, can a business attain the ‘holy grail’ of e-invoicing.
With many networks to choose from in the European Union (EU) alone, how can treasury identify the right one? A good start lies in asking the following 10 questions:
1: Does the network support a broad set of business rules for invoice validation?
A key objective for processing invoices over a business network is the potential for straight-through processing (STP), eliminating the many data entry errors and match exceptions so characteristic of paper-based invoicing. So look for a network that has equivalent levels of business rules for automated invoice validation. With a broad set of invoice validation rules treasury can reject dirty invoices automatically back to the company’s suppliers. Without them, it will only be passing bad invoices faster.
2: Does the network manage the processing of a core set of business documents, not just the invoice?
Just as a limited number of invoice validation business rules will limit the reach of e-invoicing, so too will the restriction of document transmission over the network to just the invoice. Networks that only support an e-invoice might get invoices to AP faster, but they won’t get invoices through AP faster.
The real potential for transformation comes from the ability of a business network to support collaboration not only with the invoice but also with related documents, such as catalogues, contracts, purchase orders, order confirmations, change orders, service entry sheets, freight line items, advance ship notices, payment status, and payment remittance.
However, since virtually all European e-invoice networks only support the invoice document, the scope of interoperability will be restricted to invoice receipt. To send an electronic purchase order, process a service entry sheet or receive an electronic shipping notice, you must engage multiple, distinct networks or revert back to manual processing and the use of phone, fax and email for status updates.
Today, business advantage comes from integrating e-sourcing, e-procurement, e-invoicing and early payment discount management in a single platform, across one business network. Treasurers should inquire of their network provider what documents they and their interoperability partners support. If they don’t align with corporate peer-to-peer (P2P) goals, that means more work for the company and its suppliers.
3: Does the network support flexible data requirements, extensible data fields and multiple document formats?
Standards are often promoted as the great compromise toward interoperability; however, when they restrict capabilities they can defeat a larger purpose. That is the case with e-invoicing standards that limit the fields that treasury can apply for invoice processing. For many e-invoice networks only the lowest common denominator is supported, thus limiting the invoice detail that treasury receives, the invoice matching potential and ultimately the straight-through invoice processing rate. To drive STP rates to 98% or higher means ensuring that the network provider and their interoperating partners support a full set of invoice fields and can add new fields upon request.
4: Can the network extend business collaboration for P2P transformation?
Business networks enable new processes and open up entirely new forms of collaboration that deliver value that can’t be matched in a disconnected business environment. This includes ‘flipping’ purchases order, contracts and service entry sheets into invoices; delivery of real-time, electronic order confirmations and ship notices; and sliding-scale, dynamic discounting for collaborative cash management with trading partners. Failure of a business network to support these new capabilities will ultimately restrict a company’s e-commerce potential.
5: Does the network offer a compelling value proposition to suppliers?
Sending an e-invoice by itself delivers minimal value to suppliers and no supplier would pay fees solely for invoice delivery. Global business networks, however, open up new opportunities for collaboration and business process transformation for suppliers, including:
Networks that don’t support these capabilities short-change the company’s suppliers and its e-commerce initiative.
6: How does the network protect the security of corporate data?
Over an interoperable network, a company’s data is only as safe as the weakest network link. That places the burden on it to know what security standards each network supports. Certification such as Payment Card Industry – Data Security Standards (PCI-DSS)-compliant, Service Level-1 provider, is an example of a secure data standard that ensures the level of security a business network requires.
Equally important, treasurers need to know where the company’s data resides, who owns that data and how the network will use it. Is the data stored on a server on someone’s desk? Can it be sold or used in some unauthorised way? These issues may pose problems for smaller network providers or those networks serving a small, narrowly focused niche.
7: How does the network ensure high performance and reliability?
When the scope of network coverage extends to tens or hundreds of networks, the burden will be on treasury to confirm the reliability and performance of these networks and the different service levels that it receives from them. Treasurers will be asked to understand which network is responsible if performance suffers, or if things go wrong between networks. They may find that smaller, regional networks fall short in meeting their requirements for global commerce or lack the resources to guarantee an acceptable level of network support and maintenance. If that’s the case, treasurers might want to exclude them from their interoperable network.
8: What happens if the network operator goes down or gets acquired?
In Europe, there are hundreds of business networks and many operate in a single country. As the market matures, treasury can expect consolidation as networks merge, larger networks acquire smaller networks and some networks shut down operations. This means having a transition plan to keep e-invoicing operations in place when these changes occur.
9: Will the network support a consistent message to onboard suppliers?
When business commerce spans multiple networks, it can be a struggle to maintain control of a consistent on-boarding message to the company’s suppliers across all regions, or ensure delivery of a strong message that compels action. Both are critical for supplier enablement success. Failure to monitor the message, in particular, can be damaging to the company’s brand; when left unchecked, the message to suppliers can turn aggressive and unprofessional.
10: What business controls does the network have in place to eliminate legal risk?
Last but certainly not least is the need for proven business controls to eliminate business risk. Ensuring tax compliance and support for country-specific e-invoice regulations are two critical components of any business network. Key capabilities include the ability to configure business rules at the country level and support for digital signatures. This latter feature is widely accepted by all tax authorities as proof of authenticity and integrity for e-invoicing. It places the compliance burden of proof on the tax authority, not treasury.
This assurance can’t be underestimated; for example if the treasury department learns that a business network it relied on lacked adequate controls a year after the fact, it could potentially be liable for a year’s worth of taxes on its transactions and the substantial penalties that go with them.
As treasury begins to explore network interoperability for e-invoicing, it should keep these ten questions in mind. By ensuring that all network providers in scope answer these questions to their satisfaction, treasurers will have a solid foundation for e-invoicing across many business networks.