Electronic Invoicing

It's all gone electronic guv'nor

It is full steam ahead for the roll-out of eProcurement but is it all plain sailing?

On the good ship Jolly Buyer it is: goodbye to paper, hello XML, let’s do it on the Internet and productivity and profits will soar.

As I work with buyers and suppliers a couple of issues surface:

Inconsistencies among buyers. Some buyers sponsor their suppliers into their eProcurement programme while others make their suppliers pay.

Suppliers face cash and IT constraints. Suppliers are being swamped with requests to engage in their customers’ eProcurement programmes and wrestle with the business case and IT implications.

I discuss below how this is impacting buyers and suppliers.

Inconsistencies among buyers.

You are a supplier and you have 5 requests from customers to engage in their eProcurement programme. 2 of your customers are sponsoring you so there is no cost to you while the other 3 direct you to a service provider who you will pay so your can conduct your business with your customers.

Which of the 5 requests do you prioritise?

Sounds like a question for a Business Studies exam paper but this is exactly the question that suppliers face. It is confusing suppliers why eProcurement comes at a cost to them for some customers and at no cost for others?

Of course if 1 of the requests is from your top customer then you probably don’t have a choice and with the growing practice to mandate eCommerce as a condition of business then suppliers just make the commitment even if they are not sure how they will deliver on it.

I know suppliers that have stock answers that they use to confirm they will engage in eCommerce. All of the answers say enough but not so much that precludes interpretation of their answers. So, buyer happy, supplier happy; until the day cometh.

Test of the reasonable man

When you can’t make up your mind apply the test of the reasonable man.

You are a buyer and you need your suppliers to participate in your eProcurement programme; do you believe they are more likely to say YES if you meet the cost?

Is this inconsistency going to be resolved soon? Er, no, sorry and that is due to the maturity of the market.

The more interesting question is: among buyers who is having more success in engaging their suppliers those that pay or those that insist their suppliers pay?

Answers please on a £20 note. Ta.

Suppliers face cash and IT constraints

A supplier confronted with a buyer expecting them to engage in eProcurement and pay will reach for the calculator and analyse the impact on its margins.

Those suppliers that have been down this road before will look to see if they have re-use of what they have implemented before with other customers for eProcurement.

Suppliers baulk at the idea that they have to implement unique solutions for individual customers as these add cost and complexity to their business – not very appealing.

Referring to I. above, those buyers that meet the cost include a solution so that suppliers can engage with eProcurement so solving both cash and IT issues for suppliers - much more appealing.

Suppliers benefit from automation

In reality, the win from eProcurement for suppliers is being able to automate the processing of received purchase orders and that is only possible where the buyer sends an XML document to the supplier. Suppliers don’t see eInvoicing as a benefit to them unless they get paid more quickly – and buyers unsurprisingly don’t give such commitments.

All suppliers are not equal in the land of eProcurement

There are differences between suppliers and their approach to eProcurement that broadly define 3 categories:

Highly organised: usually large companies with big IT/eCommerce investments that have formulated policy on how they conduct their online customer business. Can sometimes result in a bit of a stand-off between supplier and buyer over; “our way not your way”.

Capable but limited resources: will have e- experience and try to accommodate buyers but often limited by IT infrastructure, IT skills, people availability and usually there is no policy in place.

Newbies: first timers who need a lot of help. Many SMEs find themselves in this situation and they need an ‘out of the box’ solution that requires no IT skills and no disruption to the business and their IT. With the proper advice they will understand that eProcurement can benefit their business and cement their position as a supplier.

Attention buyers - take your own medicine

Many buyers overlook the advantage to a supplier of having an XML purchase order sent to them while at the same time compelling the supplier to send them XML invoices so they can automate the processing of invoices. I don’t get it and neither do suppliers that I talk to.

Back to the test of the reasonable man (apologies this intended as a gender neutral reference).

You are a supplier and are uncertain about what your customers’ eProcurement programmes mean for your business which buyer motivates you more; the buyer that makes you meet the cost or the buyer that says there is no cost to you?

Is anything ever free?

Does at no cost really mean free? No. Oh dear never mind eh. Suppliers are quite realistic and accept that change comes at some price but the price has to be offset against a saving or benefit to the business. When a supplier engages in a buyer’s eProcurement programme some change occurs in their business and they accept some investment in the name of progress.

Read about co-prosperity to learn more.

Finally, the big question

The market is still in an early adopter phase but it is growing very quickly and what we are all trying to figure out is what the business model needs to be for a mass market? That is another blog for another day.

Click here if you are a buyer

Click here if you are a supplier

Labels: einvoicing, eprocurement, sales order processing, suppliers, XML

posted by FrankB @ 4:17 PM