E-Invoicing is more than the sending and/or receipt
of tax compliant invoices in an electronic format. It
can deliver plenty of benefits for you and your customers.
One significant pain point that I often come across
in manufacturing organisations is the use of paper based invoicing. Paper
invoices are a barrier to efficient Accounts Payable (AP) and Accounts
Receivable (AR).
As an example, how often do invoices arrive as part
of the delivery paperwork into a busy store or goods receiving department and
are then expected to magically make its way through various departments
depending on a business workflow and arrive on an AP team members' desk for
processing.
Frequently this does not happen and so valuable
time is wasted by both AP and AR chasing payments, replacing invoices, managing
late payment cash flow issues and generally having a negative impact on an
otherwise healthy and productive supplier/customer relationship.
It's not just manufacturing. Of the current
estimated 500 billion Invoices being transmitted currently worldwide there is
estimation that only 8% of them are electronic or e-invoices. However, this
ration is changing rapidly and the number is estimated to grow at a level of
about 20% per annum over the next few years. This can vary country to country
dependant on the development status.
The growth we have seen to date in the utilisation
of E-invoicing and Automated AP has really been driven by Government and big
business where the traditional cost of the running AP automation and demanding
e-invoicing has kept it out of the reach of all but the largest organisations.
This is beginning to change and the functionality
and benefits are coming into the reach of the small and medium market in all
business types with a range and type of providers growing!
One of the key drivers of demand for this growth is
the considerable cost benefit. The cost of issuing and receiving E-Invoices and
utilising automated Accounts Payable processes can be 60-80% less than those of
manual and paper based processes.
E-Invoicing
E-Invoicing, at its most simple, is the sending
and/or receipt of tax compliant invoices in an electronic format. In a more
complex requirement it is the sending and/or receiving of invoices in a format
manageable by another process. i.e. a company has an automated Account Payable
process and requires their vendor invoicing to be issued in a very specific
format for automatically reading the data within. This is not new to some
industries.
Taking a look at the schematic it is at once
obvious to appreciate the operational and cost benefit to be gained by both the
supplier and their customers. Consider the conventional paper based invoice
issuing process compared to e-invoicing.
The actual non-value-add touch points of each
invoice become practically zero and the speed of interaction becomes almost
immediate.
Accounts payable efficiency
Aside from improving relationships with your
vendors and freeing up the team for value add activities, for buyers there are
a great many advantages to be gained through e-invoicing. Costs are reduced and
efficiency improved by eliminating sorting, registering and manual data entry
cutting down on process time and errors. Payment cycles are better controlled
allowing for on-time payment, avoidance of late payment fees and ensuring the
opportunity to capture contractually negotiated discounts.
Accounts receivable efficiency
In manufacturing cash flow is king and while not
all customers can be made to pay on time, as a supplier you need to make it
easy for them and remove all roadblocks.
E-Invoicing eliminates the delays that result from
mailing, routing, sorting and re-keying paper documents. Your invoice arrives
at the right place immediately ready for processing. On top of the time saving
and direct communication, invoice delivery costs are reduced through savings in
print, postage, materials processing and storage.
There is a reduction in lost invoices which remove
duplicate invoice requirements and difficult customer management calls. With
accuracy increased for your customer there will be a reduction in errors and
rejected invoices.
Over hundreds and thousands of invoices each year
there is substantial time to be regained for value add activity. Every business
has different requirements on size, scope and complexity but on a fundamental
level and as a starting point I believe every business should look to issue and
ask to receive their invoices in electronic format even it is just a system
generated and emailed pdf.
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This was originally written by Scott Harkin of ProcNet, but has a lot of sensible considerations and should be applicable to many businesses. Even our small business now sends all invoices as pdf format invoices and the NT government insists on e-invoices from all contractors, coupled with total electronic payments direct to accounts, once invoices are processed.
Why not your business too?
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