Paper Invoice - Thy Days are Numbered

Paper Invoice - Thy Days are Numbered

A further progress report on electronic invoicing

28 October 11

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E-Invoicing continues its rapid European and global market adoption

Latest data presented in September 2011 at the EXXP Summit, which highlights developments in the areas of electronic invoicing (e-invoicing) and electronic billing (e-billing), demonstrates that e-invoicing in Europe is now rapidly growing at 32 to 35 percent annually. In Europe, the Scandinavian countries have established a firm lead: up to 15 percent or more of all invoices are issued electronically. The Directive amending Directive 2006/112/EC on the common system of value added tax ( ) as regards the rules on invoicing adopted by the Council of the European Union in 2012, will further boost the trend. This Directive, which European Union ( ) Member States should implement by 2013, seeks to harmonise national regimes applicable to and ensure equal treatment of paper and e-invoices. As a result, it should be possible to handle cross-border and multi-state invoicing with minimum variation, provided that tax authorities take steps to align their policies.

In addition, European e-invoicing service providers recently created a trade association to: represent the industry in the public policy debate; jointly carry out projects in the cooperative space; and promote adoption. A formal announcement of the launch of this association is expected shortly.

In other global regions, substantial progress is also being achieved. Key examples are Brazil and Mexico, where the government sector is leading the way, as well as North America and the Asia-Pacific regions.

The 'buyer-centric model' remains a key driver of progress

The 'buyer-centric model'; i.e. demand expressed in particular by large and multinational enterprises as well as public sector agencies, remains key to driving the adoption of e-invoicing in the business to business (B2B) and business to government (B2G) segments. Based on this model, a company or a public entity as a buyer / payer mandates the use of e-invoicing to its supply chain. Subject to the migration path of choice, the buyer has two options to switch to e-invoicing:

  1. The buyer interacts directly with the sellers; i.e. sellers feed the e-invoices and other documents directly to the buyer.
  2. The buyer tasks a service provider to collect e-invoices or invoice data intended for the buyer. The buyer's service provider then creates a direct connection with the suppliers who send e-invoices or invoice data to the service provider. The service provider performs checks and may create the original invoice and then feeds the e-invoices into the system of the buyer. Archives are maintained and electronic signatures may be added.

In both cases, getting the sellers on board and active is the key challenge of the process, especially in the small and medium sized enterprises (SME) sector.

As e-invoicing develops there is much debate about the role of standards and whether a single standard will take hold. Although this is unlikely in the short to medium term, the lack of common standards is not an obstacle to the adoption of e-invoicing due to the fact that service providers have the tools to perform format conversion. Larger players however do prefer structured messaging standards such as United Nations / Electronic Data Interchange For Administration, Commerce and Transport (UN/EDIFACT)1 and eXtensible Markup Language (XML)2. In the SME world, the Portable Document Format (PDF) is increasingly used (as a substitute for paper). While the PDF approach can be regarded at best as an interim solution on the road to adopting true e-invoicing, it is rather common even for buyers representing large enterprises today to receive both a structured information message; i.e. an e-invoice, and a signed legible PDF. This is a popular model.

Banks and e-invoicing

As this new market is developing, stakeholders within the banking community are showing varying degrees of interest in e-invoicing. Payment service providers ( ) which see a business case consider offering services, for example, in the bank to customer (B2C) space based on electronic bill presentment (EBPP). Others look at B2B e-invoicing with a view to further integrating activities in relation to payments and online banking. Last but not least, e-invoicing can clearly add value to supply chain finance. Given the cost of handling paper invoices and the time it takes to obtain approval of payment based on a paper invoice, the opportunity to lend against an approved receivable is lost. E-invoicing accelerates the process and creates a platform of approved high quality assets on the basis of which funds can be made available to cash strapped suppliers, often SMEs. Indeed many liquid large enterprises have instituted dynamic discounting programmes for their supply chains, on the grounds that these generate a higher return than money market returns by means of discounts, and equally importantly liquefy and help to stabilise their critical supply chain partners. This whole area could benefit from further interest and participation by banks as a way of diversifying financing models and filling the SME 'financing gap'.

Banks are also beginning to play a role in partnership with technical service providers to leverage their installed customer base through online banking and offering a facility to create and deliver invoices.

In addition, banks are seeing an opportunity in the B2C segment as an e-billing consolidator for their customers, for example in the Nordic countries, Belgium, the Netherlands, Switzerland, and Portugal. Typically, utilities and other mass-billers recognise the benefits of distributing invoices or summaries of invoices through online banking facilities as a complement to their own portals.

European Commission pushes for progress

The European Commission and Member States are convinced that e-invoicing is an important factor driving policy goals such as economic growth, market harmonisation and proliferation of digital technologies. To ensure engagement of relevant stakeholders domestically, the European Commission has requested that Member States create National Stakeholder Forums for e-invoicing. Sixteen out of the 27 Member States have followed suit and more are expected to do so shortly. The European Commission is also chairing a new ' Multi-Stakeholder Forum on e-Invoicing', which gathers representatives from the national forums mentioned above as well as a number of user associations active at a European level and other invited participants. The ' Multi-Stakeholder Forum on e-Invoicing', held its first meeting in Brussels on 13 September 2011 and will conduct a programme of work over a three year period. During the first year, the forum will focus on the following activities:

  • Monitor adoption.
  • Generate robust statistics.
  • Analyse experience.
  • Identify good practice.
  • Address barriers to cross-border e-invoicing.
  • Develop an approach to allow for increased standardisation.

Unfortunately, the service provider community and the banking industry are so far under-represented in this forum and it is hoped that this imbalance will be rectified shortly. Given the synergies between the invoice, payments and liquidity it is short-sighted not to include the payments industry as well as the supply side of the industry generally in this forum created to promote the adoption of e-invoicing.

Charles Bryant is a consultant active in the e-invoicing and payments area. He advises the Euro Banking Association, and OB10, the global e-invoicing service provider. He represents the UK in the Multi-Stakeholder Forum on e-Invoicing.

Related links:

European Commission Communication: Reaping the benefits of electronic invoicing for Europe (December 2010)

European Commission Decision: Setting up the European Multi-Stakeholder Forum on Electronic Invoicing (December 2010)

European Commission's Expert Group on e-Invoicing Final Report

Related article in this issue:

Beyond the Hype: Making Mobile Payments Work. EPC 'Mobile Contactless SEPA Card Payments Interoperability Implementation Guidelines' and second edition of 'EPC White Paper on Mobile Payments'

Related article in previous issue:

Reaping the Benefits of Electronic Invoicing for Europe. A summary of the European Commission Communication issued in December 2010 ( Newsletter, Issue 9, January 2011)


1United Nations/Electronic Data Interchange for Administration, Commerce and Transport (UN/EDIFACT) is the international EDI standard developed under the United Nations. (Wikipedia).

2Extensible Markup Language (XML) is a set of rules for encoding documents in machine-readable form. (Wikipedia).

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