Electronic Invoicing - crystal ball
What evidence is there that this electronic invoicing nonsense is going to make any difference to my business? Convince me.
I'm interested in what others are doing with electronic invoicing, it helps me to understand how this is developing and what the potential implications are for my business. I'm convinced.
So, which camp do you belong to?
Few want to be first to jump in on a new wave of innovation as it hits business and getting the timing right is always a tricky business. Now, where is that crystal ball?
CaveatNow, settle down, settle down. Hell, I'm an old man, it's early in the morning and I'm gathering my thoughts here." Donald Rumsfeld
.With that in mind here is something to digest.
Breaking NewsI received the following information in an e-mail newsletter from expp-summit who keep a close eye on the e-invoicing market. They report the market is growing fast, really fast.
- Mid-2006, around 360,000 European corporate and other organisations were using e-invoicing
- Outlook is this will increase to 630,000 in 2007
- The highest growth rates are expected in the Nordic countries, the UK and Benelux
- All industries are affected by this trend
- The public sector is prominent in delivering growth. Click here for UK news
- The processed B2B volume is expected to reach 420 million e-invoices this year (+75% year on year)
Check Crystal BallQuick look at the crystal ball: 420 million e-invoices and 630,000 users. Excel calculates that each e-invoicing user sends/receives 666 e-invoices annually.
It's a start but hardly a sea change in how invoices are processed across a substantial number of organisations.
Truth is that we know that some organisations have substantially eliminated paper invoices and some have achieved 100% paperless invoicing. Others are infant in their implementation of e-invoicing.
The startling thing is that 360,000 or so organisations and growing fast in number have the capability to expand their implementation of e-invoicing. Many of these will be big organisations with 1000s of suppliers. The company I work for is implementing e-invoicing for businesses that has 5,000 suppliers and another has 30,000+ suppliers.
Let's look at the numbers another way.
360,000 organisations are engaged in e-invoicing - buyer and supplier side.
Every organisation that is currently engaged in e-invoicing expands its use to another 10 counterparties.
The number is now 3,600,000 engaged in e-invoicing.
This is not a crazy number as we have projects engaging several thousand suppliers. It is also not that far short of the number of SME businesses in the UK so if this number were across Europe then this is highly believable.
Changed your mind?To sign up to receive the expp newsletter
click hereLabels: e-invoicing, electronic invoicing, expp, statistics
2007 - will it be you?
Reflecting on my earlier blog I started thinking: how many suppliers have lost customers because they had NOT implemented electronic invoicing when asked by a customer?
I don't expect anyone to reply this question. However, I have evidence that suppliers are losing customers and I wonder how many customers they have to lose before they choose to act?
Never mind with a new year in prospect we should look to the future.
Will it be you in 2007 that is asked to implement electronic invoicing?What clues do you have to know if it will be you?
1. Do you know what your customers' procurement policy is?
Click here to see an example
2. When you win a new contract or renew a contract check to see if your customer has introduced a clause concerning eCommerce. Many buyers are introducing eCommerce clauses as a condition of business even though they may not implement that immediately.
3. Do you have any UK public sector customers? The likelihood is that sooner than later you are going to be required to submit electronic invoices.
4. Have your suppliers implemented electronic invoicing? That is, they want to send electronic invoices to you.
5. When your are replying to an Invitation to Tender (ITT) or Request for Quotation (RFQ) did the customer require you to send your reply on paper or reply using an online service. If it was the latter then that is a clue they are moving their procurement away from paper to electronic delivery.
6. Has your customer contacted you to have a conversation about your early payment discount terms?
7. If you have had an approach from a customer about your submitting electronic invoices how did you respond? a. I didn't respond my preferred response was no but obviously I couldn't say that. b. I said I would think about it. c. I said I would if I knew how. d. I said Yes - how do I do that?
If the clues are there and you need some help then
click hereLabels: einvoicing, electronic invoicing, procurement
Electronic Invoicing - the future is coming - or is it?
How many times have you tried to predict the future and spent some time trying to understand those things that would influence your prediction? I picked up on an article published by gtnews.com on July 04 2005 that had a stab at the 'Future of Electronic Invoicing'. gtnews.com is read by those in finance and treasury.
The future was described like so:
The electronic invoicing industry is moving towards more inter-connected B2B solutions like federated networks.So, some 18+ months has passed is there any indication that this future is coming?
The article correctly highlighted the obstacles to buyers and suppliers from 'lock-in'. To strike an analogy; if you had to choose your telephone provider (telco) based on who you could reach by telephone using that telco then that presents you a problem if one telco can not povide you a service to reach everyone that you need to or might want to speak with. Of course this is not an issue because the telco industry understands their customers want a service that provides any to any connectivity.
The article also suggested that the service providers that deliver electronic invoicing will need to deliver the same any to any connectivity that your telco does. Is there progress towards any to any connectivity using federated networks?
To take an example:
Supplier A uses Vendor B to transact their eBusiness with Customer C
Supplier D uses Vendor E to transact their eBusiness with Customer F
Customer C invites Supplier D to transact their eBusiness through Vendor B whereas they would prefer to use their existing Vendor E and for Vendors E and B to provide a through connection to Customer C.
This idea of federated networks is highly appealing but is not a reality today and I know of no commercial discussions between vendors.
Let me know your views and I will compile your replies in a future blog.
Labels: accountants, electronic invoicing, federated networks, treasurers
Green invoicing
I'm not suggesting you print your invoices on green paper, quite the opposite I advocate you don't print your invoices.
With the need to save the planet and accountability for our own carbon emissions we can make a difference by NOT PRINTING INVOICES. It saves paper and is green.
How much paper?
Recent research indicates that every invoice has a paper trail of 6 sheets of A4 paper.
Print 1000 invoices a year and 6000 sheets of paper are consumed.
Stack that paper up and it reaches a height of 2.12 feet. What's all the fuss about?
Now let's say there are 1M businesses producing 1000 invoices per year.
That paper now stacks to a height of 1204 miles that is 186 times the height of Mount Everest.
Labels: carbon emissions, environment, green, invoices, paper invoices
Electronic Invoicing - spend or invest?
I was reflecting on the use of language and how government no longer spends our money raised as tax revenue they invest it.
Electronic Invoicing; do you spend or invest?
There is a cost to implementing eInvoicing and someone has to meet that cost. Will it be the buyer or the supplier? This debate about who pays is unresolved with no consensus on who pays and why. I suspect it will remain so for the foreseeable future.
What is the outcome of implementing eInvoicing?
AP costs are reduced - easy win and the financial justification provide you can cash the savings
Discounted goods and services - if you have capital available to take early payment discounts
Warm and fuzzy compliance improvement - but some pay attention others don't
Lower prices - how is that?
I was thinking the other day about how to, once again, help a customer justify their investment in electronic invoicing. They need their suppliers to participate and I used the words "you need to sponsor your suppliers.".
Now I want to use the words
'invest' and 'sponsor' when discussing eInvoicing.
Previously I would have talked about
"who will pay" and
"getting suppliers to commit".Is this just a massage of words or more?
Justification for invest and sponsor approachLet's say you spent £15M on purchased goods and services per annum with 425 suppliers. Your investment in electronic invoicing to include the sponsorship of your suppliers' participation amounts to £15,000 per annum (0.1% of your spend).
You now are looking at what ROI you can achieve on £15,000 per annum.
Let's go for the simple case:
If you accept that eInvoicing is not a fad and is on course to be the way that buyers and suppliers will facilitate AP and AR functions then we need a solution that is equitable for all. Supply chains have many tiers and the cost in the supply chain is ultimately reflected in the price that the end customer pays. eInvoicing is a method to reduce the cost of processing a supplier invoice that saves the payer and payee time and money and when you put that saving into each tier of the supply chain there is a benefit to all supply chain participants. Perhaps the milkman is not a big player in this scheme but you probably pay them out of petty cash.
This is why supply chains prosper as they seek to drive cost out of the supply chain as lower overheads result in lower prices.
For
eInvoicing to deliver the best ROI you need all suppliers to participate as then you can have one AP process (all electronic rather than electronic for some and paper for others). Therefore all suppliers should be sponsored.
How do your recover your investment?
You spend £15M per annum
You have 425 suppliers
You invest £15,000 per annum
You save £30,000 with no risk
You sponsor your suppliers and recover your investment by taking a discount of 0.2% (1/5%) on all invoices (£15M x 0.2% = £30,000) Will your suppliers quibble at a 1/5% discount?
Your ROI is only based on savings against money that you were going to spend anyway and does not include other cash savings that you might achieve. It a no risk return.
Even if you reduce the number of suppliers, as many are doing, then you spend the same but with fewer suppliers but this does not affect your ROI. Actually, with the trend to have a smaller number of suppliers who in turn sub-contract with suppliers who used used to be direct suppliers to you, then the argument to drive cost out of the supply chain is even more valid.
Let suppliers know the dealYour suppliers benefit as they should no longer need to service requests for copy invoices and your capability to process supplier payments on time is greatly improved. Of course if you never intend to pay your suppliers on time then that is another matter. You may also send a message to your suppliers that you only deal with suppliers that agree to submit electronic invoices so they know they are on a level playing field with other suppliers.
Your supplier has invoices totalling £200,000 per annum under the formula above their invoices would be discounted by £400 (£200,000 x 0.2%) that is £8 per week to have the capability to receive and process electronic orders and send electronic invoices - the price of twenty five first class stamps.
Your supplier has invoices totalling £10,000 per annum under the formula above their invoices would be discounted by £20 (£10,000 x 0.2%) that is 40 pence per week to have the capability to receive and process electronic orders and send electronic invoices - little more than the price of one first class stamp.
A better way I suggest this approach is much more favourable way to approach the introduction of eInvoicing than to confront suppliers with an
upfront cost and is perhaps showing them the way to go downstream in their supply chain to introduce eInvoicing so there are savings in n tiers of the supply chain.
Food for thought?
Labels: einvoicing, lower costs, roi, suppliers
