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Keywords: electronic invoicing, e-invoicing, high volume suppliers, mandatory e-invoicing, accounts payable, accounts payable technology, AP technology
Blog Post | 24 October 2012
Author: Anna Bowsher
Earlier this month, at sharedserviceslink.com’s US Summit for Leaders in Finance Shared Services, Adam Goldberg, Executive Architect from the US Treasury, presented a session on mandatory vs. non-mandatory approaches to e-invoicing. Who would’ve guessed the debate that ensued!
We all know the benefits of e-invoicing: Adam said the US Treasury had already realised a total of $450m in savings since implementing it in 2007. But could this figure be higher if every single supplier used e-invoicing? Mandating e-invoicing may seem like an easy option, but it may also pose some serious problems, as our audience realised.
Divided into roundtable groups, our audience discussed the following:
What are the risks of having a mandatory message?
Mandating e-invoicing is clearly quite a tough stance, though some organisations may feel they have no choice if they want to make progress on their project and see ROI as quickly as possible. But could this put the business relationship with your suppliers in jeopardy?
Where suppliers are in a more powerful bargaining position, this will certainly make mandating anything difficult, unless they can see the benefits for their business. One delegate from a household name supermarket said that in their case, the benefit to the suppliers was clear: the faster processing of invoices meant that their stock was on shelves ready to be sold sooner. Considering benefits beyond cost savings are therefore still a key factor in negotiations with your suppliers, especially given the large financial investment they may have to make in implementing the necessary technology.
But as one delegate stated, “how do you incentivise a supplier to do e-invoicing in an environment where it’s not mandated?” For your smaller to mid volume suppliers who may not have the resources to comply immediately but lack the bargaining power to discontinue business, a different approach is needed. In this case, companies risk wasting time as suppliers drag their feet over implementation.
One delegate from Time Warner Cable Inc suggested that by offering a number of options to your suppliers, you mitigate the risk of mandating any project.
What is the cost of not having a mandatory message?
Despite having varying policies with regards to e-invoicing in their own organisations, however, all the delegates agreed that without strongly encouraging a preferred invoicing method to your suppliers, you will never see a return on your investment.
“Failure to enforce e-invoicing to some degree with your suppliers will only lead to an inefficient and ineffective process”, stated one delegate.
So which suppliers could you afford to have a mandatory message with?
Following the 20/80 rule (i.e. where 20% of your suppliers provide 80% of your invoices), there are some categories of spend where it just makes more sense to use e-invoicing.
“By strategically segmenting your supplier base and rolling out your mandated approach in stages, you’re slicing up a large obstacle into bitesize chunks”, said one delegate from a Fortune 500 company. Using this approach, his organisation was able to roll out e-invoicing within a relatively short space of time as they set realistic deadlines by dealing with issues specific to the type of supplier in each segment.
Your high volume suppliers will be the most obvious category of suppliers to first approach with an e-invoicing project, as the business case for them will level out any financial investment they have to make in implementation. The more they are reliant on your company for business, the less likely they will want to risk this. E-invoicing will enable business not only to continue at the current pace, but in addition allow suppliers to get paid quicker whilst saving costs on back office processes.
What approaches to e-invoicing projects has your organisation taken with suppliers? At the Accounts Payable Tech and e-Invoicing Summit 2012, not only will we be hearing from companies such as Unilever on their best practice techniques for implementing e-invoicing on a global basis, but our supplier panel will discuss from their point of view, the best on-boarding practices.
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