All the paper clogging up the accounts payable process is looking more and more absurd as companies are struck by how cumbersome, costly and inefficient pushing paper really is.
We ask ourselves: “Is there a better way?”
The answer is YES, of course there is. And it comes, undeniably, with e-invoicing. True e-invoicing. We are not talking about emailing PDFs here. We are talking about electronic data, which leads to improved approval cycles and ultimately, the ability to transform the financial supply chain into a revenue generator.
But when we look at the problem, we often fixate on what I would classify as the “low level”’ issues: the cost, the inefficiencies, and the poor productivity per FTE.
This article attempts to widen the lens, so our awareness encompasses the bigger picture, and hooks onto the bigger prize. We will examine the role of e-invoicing in achieving this prize.
And thus, the question becomes, is e-invoicing alone enough?
The back story
Depending on which country you live in, the amount of paper in your life might be minimal, or utterly overwhelming. Some governments, in countries like Mexico, Brazil and New Zealand, have championed the adoption of e-invoicing, and penetration is 50% or above. However, most governments have failed to get behind e-invoicing as yet, and in most European countries, and the US, e-invoicing adoption is low.
The reason for this low adoption is simple – if mere paper elimination is your sole driver for adoption, the business case is good, but not really good.
Add to this the following catch: The more mature a company’s processes are, the more ready they are for e-invoicing… but the business case is less compelling, since they’ve already undertaken process improvements and cost reduction initiatives to get to where they are. So it’s a catch 22 – the companies prime for e-invoicing struggle to make the numbers compelling, as their starting position is not so bad.
A shift in perspective
E-invoicing must be seen as a means to an end – an enabler. We must look at the wider possibilities that come from having e-invoicing in place, and focus on these.
The possibilities are exciting:
- Better balance sheets from dynamic discounting and supply chain financing, where 100% of negotiated discounts are captured
- Root cause analysis leading to action, driven by analytics representing spend, buying behavior, supplier behavior, approval behavior and payment behaviour
- Leakage slows down or stops all together, as there are systematic controls in place to see that what was negotiated, contracted, and PO’d for, is invoiced and paid for
- Suppliers control their own destiny, as self-service becomes a pleasure. Suppliers can be on their own portal profile, studying their own reports telling them to fix an invoice, or let the buyer know if they want to be paid early, or find out a due date or how much is outstanding
The list goes on.
All of the above benefits are enabled by implementing e-invoicing, but then the value continues to increase exponentially.
For the benefit of this article, I am going to draw on some stats from two companies who have transformed their business case through example 1, above.
Walking through the streets of San Francisco, you’ll look down and see manhole covers marked PG&E. Pacific Gas & Electric made great gains with e-invoicing. Here are some of the numbers that they often present:
• 371,000 invoices converted to electronic
• 75% cost reductions in Accounts Payable
• Number of invoices processed per FTE per
annum increased by almost 1000% from 121 per day to 1138
All very good. But the savings that stole the limelight and left the above stats in its shadow came from early payment discounting.
And get this – the savings took place over 24 months.
That’s $106,849 a DAY.
Shall I break it down by the hour…?
You get my point. What this case highlights is, every day you delay the e-invoicing and dynamic discounting, or supply chain financing decision, you could be costing your business $100,000, more or less.
Change happens quickly. Six seems to be the lucky number for PG&E – the dynamic discounting program took 6 weeks to implement, 61% of suppliers requested multiple early payments, and 600 suppliers onboarded.
Coca-Cola Bottling began its dynamic discounting program in May 2012, and 6 months later they had enrolled 87% of their suppliers. They have made a pledge to pay certain invoices as soon as they are approved, in return for an early payment discount.
The financial benefit for them was significant – when last measured, they confirmed an average of $505 savings per invoice.
How to get going
There is no mystery to fathom here, no decoding required. It’s simple. Service providers are well aware of this sea-change, and have tooled up accordingly. You contact a service provider, they assess your situation and help you build the business case and implementation plan, and off you go.
The title of this article was, “Is e-invoicing enough?”
The short answer is that electronic invoicing is, of course, better than manual invoicing. But by itself, it’s sometimes hard to get excited about it. However, what makes the case for e-invoicing mind-blowingly obvious, are the opportunities that e-invoicing enables, like dynamic discounting and supply chain financing. Looking at the numbers, e-invoicing is irresistible.
Give in. Today.