Is e-invoicing the right technology to leverage success?
The concept of shared services has been around for over twenty years now. The key drivers behind shared services in the 1990s were around process improvement and reducing cost.
These goals continue to drive the direction of shared services organisations (SSOs) today, but increasingly, SSOs are moving beyond transactional and into an advisory, value-adding role. One key enabler to achieve this is e-invoicing. e-Invoicing is without question a key enabler to springboard an SSO from standard to exceptional.
In August 2012, sharedserviceslink.com and Ariba partnered up to run a survey on the state of e-invoicing. We wanted to better understand drivers, considerations and fears. The study attracted 184 responses. Here are some of our key findings.
Efficiency is still the main driver for e-invoicing
When asked what the main driver was for implementing e-invoicing, process efficiency came up top at 40%, followed by cost saving at 30% and service improvement at 10%. Clearly, savings and efficiencies are still the key drivers behind implementing e-invoicing. Some of the biggest savings come from the reduction in manual touch points and improvements in invoice quality. 60% of survey respondents said about 40% of their AP staff are dedicated to responding to supplier inquire. It follows that significant cost savings can come by eliminating errors and exceptions. Many e-invoicing tools now come with a supplier portal which reduces the volume of calls hitting your helpdesk.
Optimising working capital
One huge benefit of e-invoicing is the impact it has on capturing negotiated discounts. Once the invoicing process is toned up and invoices are ready to be paid early, businesses can capture early payment discounts. This helps companies sweat their capital, rather than having their reserves sit in a low interest bank account. Of our survey respondents, 70% captured less than half of their available discount opportunities. This represents a great opportunity to achieve further savings. Ensure you account for this in your business case – it can multiply the ROI by a factor of ten.
The survey also identified a striking distinction in finance structures between those with e-invoicing and those with no plans for e-invoicing. 61% of respondents with e-invoicing have a shared service centre (SSC) for their finance function while only 31% of those organisations with no-plans for e-invoicing have a SSC. Almost all of those organisations that receive and process greater than 250,000 invoices annually run centralised finance or SSCs. Perhaps this suggests that those with an SSO are more geared to business improvement and relish enablers like e-invoicing.
Promoting best practices
e-Invoicing has been proven to help align finance and procurement by helping with PO compliancy programmes. Processing non-PO invoices can have its challenges with high error and exception rates. e-Invoicing has proved to streamline non-PO invoice processing by eliminating data entry errors and exceptions, accelerating the approval cycle time, automating or providing a more rigorous account coding process and helping enforce price and preferred vendor policy. So when you roll out e-invoicing, make sure you apply it to your non PO as well as your PO transactions. It will help your overall ‘first time match rate’.
Compared with manual processing paper invoices, e-invoicing is more efficient and offers strategic benefits. Those with no plans for e-invoicing lagged in virtually every category of strategic impact and savings including: discount capture, use of purchase orders, and the organisational structure of their finance function. As one of the respondents, a general manager at a leading European financial services company said, “[e-invoicing] saves time, eliminates human error, improves the time of processing… it eliminates waste, it’s environmentally friendly and promotes cost optimisation”.