• Dec. 9, 2016, 3:44 am

Worldwide adoption of e-invoicing: A slow but sure progression

The following is a guest post by Bob Cohen, VP, North America, Basware.

While e-payments have taken off in the consumer world, they’re still a work in progress in the B2B arena, where payment methods and customs vary from country to country.

Consider, for example, the use of checks – a staple method of business payment in the U.S. – yet a thing of the past in Europe.

One area, however, where most countries agree is their interest in electronic invoicing and the benefits it provides, one of which is to help shorten the payment cycle.  Today, it takes an average of 55 days for a paper invoice to be received and paid, but by combining e-invoicing with e-payment, that timeframe can be shortened to just 10 days. Through e-invoicing, organizations can gain insight into critical data that enables fast payment, such as: who the buyer is, who the supplier is, what was ordered, the amount of the invoice and when the invoice was paid.

Organizations moving to e-invoicing also benefit from cost savings of up to 90 percent as well as greater efficiencies and accuracy. While businesses around the world recognize the value that e-invoicing can deliver, the adoption rate is still low for a variety of reasons, such as resistance to change or inertia.

According to a 2014 Billentis report, of the 170 billion business invoices sent globally each year, less than 10 percent on average are sent electronically. The good news is that this is increasing slowly, but surely. According to a survey conducted last year by the European E-Invoicing Service Providers Association, 986 million e-invoices were processed and delivered by its members worldwide in 2014, representing a 17 percent growth over the previous year.

One sector that has made a major push into e-invoicing is government, where billions of invoices are received and sent every year.  In much the same way that payment preferences differ from country to country, e-invoicing adoption varies around the world, with countries facing different challenges, expertise, and motivating factors.

The U.S. government, for example, is pursuing e-invoicing for efficiency and cost savings. While slower to adopt e-invoicing than its global counterparts, the U.S. has pushed for mandates to promote e-invoicing, including requiring all treasury bureaus to implement the Invoice Processing Platform by the end of 2012; and a White House memo in July 2015 that pushed for all government agencies to migrate to electronic invoicing by the end of FY 2018.  In addition, President Obama’s Supplier Pay Initiative, enacted in Nov. 2014, asks companies to pledge to pay their small suppliers faster or provide a financing solution to access working capital at a lower cost.

Conversely, on this continent, South America has been making great headway in e-invoicing adoption with particular focus on promoting tax compliance and curbing fraud.

But the government body leading the pack in e-invoicing can be found across the Atlantic in Denmark. The Danish government, which has required public sector suppliers to send e-invoices for more than 10 years, receives up to 90 percent of invoices electronically. The governments of Norway and Finland closely follow with high e-invoicing rates, while Belgium, which is still in the earlier stages of initiating an e-invoicing platform, has a significantly lower adoption rate.

The U.K, which is motivated to implement e-invoicing to boost the cash flow of its many smaller businesses, faces the internal challenges of autonomous departments with siloed and separate processes and a reluctance to change. The U.K. government continues to push ahead, however, for speedy payment as well as e-invoicing, enacting the Prompt Payment Code, a voluntary agreement to help small businesses get paid within 30 days.

Germany is incentivized to implement e-invoicing to achieve cost savings and efficiencies and has undertaken several initiatives to speed up adoption. France, which is embracing e-invoicing as part of a national program to simplify and modernize processes, has decreed deadlines for all suppliers sending e-invoices to the government. And unifying the call to action, Europe 2020 objectives call for all governments to be able to receive e-invoices by 2020.

Surprisingly, in many instances, governments are ahead of the business community in implementing e-invoicing and are paving the way for more efficient, cost-effective and faster payments. When combined with new e-payment technologies that enable payment once an invoice has been approved, suppliers can be paid faster and cash can flow more freely.  While there is much progress, there is still work that needs to be done in making e-invoicing mandatory and universal, and providing open standards across borders and countries.

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Bob Cohen is Vice President, North America for Basware, a leading provider of networked purchase-to-pay solutions, e-invoicing and alternative financing services that enable organizations around the world to grow their businesses and unlock value across their operations. For more information, contact robert.cohen[at]basware.com, or call 203-487-7900.

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