At the end of June 2012, the European Council, which includes the heads of state or government of the European Union ( ) Member States, stated:
"Swift progress is required to achieve a well-functioning Digital Single Market by 2015, which will provide new dynamism to the European economy. In particular, priority should be given to measures aimed at further developing cross-border online trade, including by facilitating the transition to e-invoicing and promoting the cross-border use of e-identification and other e-services." (See link to ‘Conclusions of the European Council' below).
It is interesting to note the specific focus on promoting the transition to e-invoicing. Invoices are typically produced by automated ERP systems and the like, printed, posted and then re-keyed or scanned back into electronic systems. What a waste of effort, not to mention the resulting errors! Much better to deliver process and store invoices entirely in electronic form throughout their life-cycle.
The European Commission and the Member States have been pushing several initiatives aimed at promoting the mass adoption of e-invoicing:
Simplifying the legal/ regulations by placing paper and electronic invoices on the same footing, in particular by providing a range of choices for taxpayers to demonstrate the authenticity and integrity of invoices and the underlying transactions - crucial for refunds, compliance and fraud prevention. New regulations will go into force in January 2013.
Encouraging electronic public procurement and positioning the public sector as a role model for electronic trading including for cross-border. This objective is also supported by the Pan-European Public Procurement Online (PEPPOL) initiative (see link below).
Leading the ‘ Multi-Stakeholder Forum on e-Invoicing' (see links below). To ensure engagement of relevant stakeholders domestically, most Member States have created national stakeholder forums.
Supporting initiatives to promote standardisation and interoperability in the area of e-invoicing, and development of actions to achieve mass adoption by reaching small and medium-sized enterprises (SMEs).
Market adoption of e-invoicing continues to progress. Industry experts estimate that about 18 percent of invoices in the are issued electronically. Large corporate buyers increasingly mandate e-invoicing for their supply chains and encourage their suppliers to submit e-invoices often using the services of a business to business (B2B) platform.
Aside from creating huge cost and efficiency benefits, the acceleration of the invoicing process and crucially the approval cycle for e-invoices is a ‘game-changer' for Supply Chain Finance. Supply Chain Finance is not new and takes many forms: trade finance, factoring, invoice discounting etc. What has emerged in recent years is so-called Reverse Factoring or Approved Payable Finance. In this model, large buyers are able to offer early discounted payments to their suppliers whilst preserving their original or extended terms. A financier acts as the funding instrument for such transactions, although some liquid companies may deploy their own liquidity. The e-invoice plays a key role as a transparent vehicle for such financing.
The benefit to the buyer lies in the ability to provide liquidity to suppliers and to stabilise their supply chains. Suppliers, often SMEs, may tap into new sources of funding in a constrained market for traditional borrowing.
In embracing the world of e-invoicing it is observable that banks are most engaged when they are able to mobilise the e-invoice for the type of financings discussed above, or when it is close to their payments franchise. The latter point is illustrated by the country-specific adoption by banks of services for e-billing - the presentment and payment of consumer invoices provided by large billers and processed through the Internet bank. Not all communities recognise this opportunity however especially those that are major direct debit users. On the other hand one or two communities see the combination of e-billing and a corresponding payment as a viable alternative to the direct debit.
For B2B, banks have a variable attitude, some monitoring developments, others ruling it out of scope, others looking for partnerships to originate supply chain finance, others seeing value in related e-services and others engaging in invoice processing itself. The latter is most likely to be deployed on the basis of partnerships with service providers or B2B platforms and ‘white-labelled'. Indeed this service provider community is coming of age and recently formed a trade association at European level (www.eespa.eu). Some banks have joined EESPA.
A final thought: banks are enterprises in their own right and are increasingly likely to enter e-invoicing for their corporate purchasing. There is a lot going on just ‘upstream' of the payment component.
Charles Bryant is a consultant active in the e-invoicing and payments area. He advises the Euro Banking Association, and OB10.com. He represents the UK in the Multi-Stakeholder Forum on e-Invoicing and is Vice-Chairman of the European E-Invoicing Service Providers Association (EESPA).
Additional note: E-invoicing is outside the scope of the , however, it is recognised that there is a strong link between e-invoicing and the Single Euro Payments Area ( ) programme. The authorities have identified progress on e-invoicing as a principal policy goal. In May 2010, the European Commission (the Commission) published the communication ‘A Digital Agenda for Europe' (see link below), which defines the key enabling role that information and communication technologies (ICT) will have to play if Europe wants to meet the strategic objectives identified in the Commission's ‘Europe 2020' strategy. The ‘Digital Agenda for Europe', states that: " will also provide a launch platform for value added services linked to payments, such as the development of a European e-invoicing framework." The Commission set out specific measures aimed at promoting the development of a European e-invoicing framework in its communication ‘Reaping the Benefits of Electronic Invoicing for Europe' (see link below), which clarifies that the Commission sees e-invoicing becoming the predominant method of invoicing by 2020.
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