How Electronic Invoicing Can – And Should – Really Work

Chris Rauen

If an electronic invoicing system meets the needs of accounts payable but operates in isolation from the rest of the enterprise, how much value does it add?

Plenty — if you’re doing business in the 1990s. Since then, many types of electronic invoicing systems have entered a crowded marketplace, all seeking — with varying degrees of success — to streamline the complex and often tedious effort to process invoices globally.

Take a holistic approach to invoice management

In today’s digital economy, remarkable new business value comes from linking invoice data to contracts, purchase orders, service entry sheets, and goods receipt for automated matching. Furthermore, automation of the invoice management process must extend beyond enterprise operations to include suppliers. Yet few platforms enable this. By treating accounts payable as a silo, many e-invoice systems fall short of their potential.

How can linking electronic invoicing with an enterprise’s other operational systems, and to suppliers, unlock this value and support intelligent finance? It turns out that a holistic approach to invoice management in a digital age reduces costly errors, strengthens compliance, and facilitates collaboration both within the organization and among trading partners.

Cut costs, reduce errors, improve compliance

Digital networks marshaling the disparately held data from buyers and suppliers can help to reduce invoice errors. Yet if the underlying information is faulty, then networks risk merely amplifying it. To reduce invoice errors effectively, a digital network must rely on intelligence — not just that of the individuals entering the data, though that’s helpful, but through smart invoicing rules that are essential to a business network. These rules effectively validate invoices before posting for payment to streamline invoice processing, reduce operating costs, lower the risk of overpayment and fraud, and maximize opportunities for early payment discounts.

By enabling real-time collaboration between buyers and suppliers, digital networks not only bridge the information gap that can delay prompt invoice processing, but they also reduce the complexity often associated with compliance. That includes effectively vetting suppliers and monitoring business policies before a transaction takes place.

A cloud-based network can assess trading partners across hundreds of criteria. Do they have the governance structures in place to root out forced labor from their supply chain? How well do they document responsible stewardship of natural resources? What is their track record in awarding business to women- and minority-owned suppliers?

In addition, digital networks help organizations to navigate the challenging reporting requirements for local and cross-border taxes. Of course, while software alone cannot ensure compliance with ever-changing tax policies across jurisdictions, it remains a powerful tool aiding internal audit and treasury’s efforts to achieve it. Compliance, once a cumbersome task that fell to a dedicated team, now can be managed from a dashboard.

Boost collaboration with suppliers

As crucial as data accuracy and compliance are to e-invoicing, perhaps the greatest advantage of digital networks is collaboration. Issuing an invoice, even when accurate and on-time, typically resembles a one-way, asynchronous conversation. A buyer receives an agreed-upon product or service from a supplier, who sends out an invoice at a later date and, at an even later date, receives payment. The scenario plays out much the same as it did decades ago. But the advent of digital networks challenges that paradigm. The immediacy of network communications begs the question: Should electronic invoicing merely replicate the age-old process that postal mail once facilitated? Or shall it improve upon it?

Foresighted chief procurement officers are increasingly opting for the latter. Through their day-to-day experience with digital networks, they have come to view invoice processing as one component of the broader exchange of real-time information among trading partners. An electronic invoice reflects a snapshot of the multi-party collaboration that networks enable, and — through intelligent business rules — flags potential errors or exceptions relating to the transaction. As buyers and suppliers extend collaboration to product design, innovation, and product delivery, you can expand the scope of electronic invoicing to capture up-to-the-minute progress reports on the teamwork within and across organizations.

Open the window

Does your electronic invoicing system focus its sights only on accounts payable? Or does it open a window onto the rest of your operations and those of your trading partners as well — a window that brings collaboration and mutual growth within reach?

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Chris Rauen

About Chris Rauen

In his role at SAP Ariba, Chris Rauen educates procurement, finance, and shared services professionals on the business value of accounts payable automation, procure-to-pay transformation, and collaboration via business networks. Chris has addressed these topics at finance and shared services conferences, in articles for trade and business publications, and in blogs for online communities. Chris has more than 15 years of experience in e-payables, and holds a B.A. in Economics from the University of California, Santa Barbara.