Checklist Description
This checklist considers some of the outline factors that can lead to greater use of electronic invoicing (e-invoicing), and considerations when implementing e-invoicing systems.
Definition
E-invoicing systems can provide a comprehensive solution to the problems associated with large volumes of paper invoices. Traditional paper-based billing processes are inherently vulnerable to errors, particularly when staff are deluged with high volumes of invoices, potentially leading to problems such as missed, duplicate, or unauthorized payments. Paper-based invoicing systems based on multiple staff approvals are also prone to unnecessary payment delays. For example, if one or more of the authorized sign-off managers is absent, paper invoices may be misplaced, ultimately creating payment delays, which can put severe strain on client/supplier relationships. Though increasing the headcount of accounts payable units can improve internal departmental capacity, there may be payment-related problems originating elsewhere within the organization, and also there are significant departmental running costs.
Many companies’ first step towards e-invoicing is simply to scan all paper invoices received or to create supplier/client point-to-point invoicing systems. However, centralized, hub-based e-invoicing systems soon come to the fore, supported by legislative changes and the development of e-invoicing standards, typically based on XML (extensible mark-up language) computer code. The design and implementation of an e-invoicing system largely depends on the firm’s unique needs, in terms of factors such as invoice volumes, currency conversion needs, approvals process, and the level of integration necessary with other existing management information systems. Another key determinant of successful development is, frequently, the adoption of an e-invoicing system partner with the experience and resources to customize e-invoicing solutions to fit companies’ highly specific needs. Among other advantages, e-invoicing system specialists can help clients to overcome compatibility issues between payment system platforms, by supplying a payments hub system with an interface that can be adapted to clients’ specific needs.
Advantages
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A well-implemented e-invoicing system can improve supplier and buyer relationships by making the payments process more reliable.
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E-invoicing can create significant internal cost savings for the business by streamlining the invoice payment process.
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Payment-related information can be supplied directly from the e-invoicing system into management reports as part of a wider management information system.
Disadvantages
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E-invoicing systems can be expensive to introduce, with the necessary investment only recouped if a threshold volume of invoicing makes use of the system.
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There is no universal standard in e-invoicing systems; each company’s precise needs are distinct.
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The supplier can sometimes have little short-term incentive to participate in e-invoicing systems, given that the potential cost savings tend to arise on the buyer side. However, in a competitive environment, suppliers can feel under pressure to comply, to retain the business.
Action Checklist
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A company and its chosen system partners should liaise closely with clients and suppliers when designing and implementing systems—the full benefits of e-invoicing are only achievable if the system is used close to its maximum capacity.
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Ask chosen system partners to work with any suppliers holding out for paper-based invoice submission—some e-invoicing hub operators can supply software to help with the transition.
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Consult financial advisers over tax considerations ahead of implementing an e-invoicing system. Legal advice in particular jurisdictions is also advised.
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Explore how the implementation of e-invoicing systems could improve your company’s competitive position, for example, new efficiencies might enable your sales team to win new business ahead of alternate suppliers.
Dos and Don’ts
Do
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Once your basic e-invoicing system is operational, use the system initially for internal clients to help identify any outstanding post-testing problems, before exposing external clients to any possible gripes.
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When assessing the cost of introducing an e-invoicing system, consider how a well-run system could help to improve the quality of input to wider management information systems.
Don’t
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Don’t use e-mail invoices as input to your e-invoicing system as this can expose the network to viruses. Invoice-related communications are best accepted via a secure, closed network.
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Don’t choose an e-invoicing system based purely on initial costs. Internally developed systems may appear cheaper initially, but may prove costly in terms of reliability and compatibility issues, while general IT supplier companies may lack relevant specialist e-invoicing and payment systems experience.
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