Implementing an electronic invoicing project is not difficult, but to achieve a grade of implementation superior to 90% requires a different approach.
An incorrect focus will take us from a dream to a nightmare, during the electronic invoice processing, ending up in discouragement for the force dedicated. Long implementation periods, expensive developments and low grade of acceptation among clients and providers are habitual currency in these types of projects.
Electronic Invoice Processing
We will attempt to respond to the main questions to take into consideration to undertake this type of project successfully.
- Technological or accounting focus?
- What should the scope of the project be?
- How long should the implementation project last?
- What should the cost model be and who should assume it?
We will illustrate each of the questions with a selection of metrics, some of them demoralizing at first sight, resulting from “benchmarkings” in financial departments within the areas of accounts payable and invoicing.
Electronic invoice processing: Technological or accounting focus?
- 96% of electronic invoice processing projects are sponsored by the area of systems
- In 8% of the electronic invoicing projects the accounting area is the precursor of the process.
There are no doubts about who it corresponds to lead an invoicing process, but this changes when talking about an electronic invoicing process.
It is very common, perhaps, because of its newness or because of the technological and communications component involved in electronic invoicing processes that it is the System department that promotes these types of solution.
The point of view and focus of a technology department and an accounting one are completely different. For the first, the focus is on the arrival or receipt of the invoice, while the second is focused on invoice payment or that it is registered in the accounting system, and in this aspect resides a great difference.
In the implementation of an electronic invoicing it is important to take into consideration how it will affect the providers and their accounting and invoice issuing process, which is vital to achieve a high level of implementation. Any solution that implies a process change more cost or manual delays means a lower level of acceptation.
Equally, taking into consideration how my electronic invoicing protocol will affect the accounting process of my clients is the difference between acceptation or rejection.
Electronic invoice processing: How long should the implementation project last?
- 90% of electronic invoicing projects last more than 12 months
- After two years, 60% of projects cover less than 35% of the invoices.
Giving that there exists a very high potential saving and in an environment of continual regulatory change, the implementation period is critical. As well as delaying the potential savings, a long setup process runs the risk of the project becoming obsolete.
Two weeks, and between 8 and 10 for highly-complex process, is more than enough time to implement an electronic invoicing process.
Electronic invoice processing: What should the scope of the project be?
- 75% of the electronic invoicing projects only cover the invoice issuing and receipt and support one unique formats
- 92% of electronic invoices sent require some form of manual task by the client that receives it.
First we should decide which we should undertake first, the implementation of electronic invoicing protocols with the providers or the issuing for clients.
Independently of the metrics of cost parameters, which we will look at later, the operating costs of the provider invoice process is much higher than issuing to clients. The average productivity of an AP accountant is 10,000 provider invoices a year, while an AR invoicing employee has the capacity to process 65,000 invoices per year.
Electronic Invoicing in provider cycle.
The automation of invoice receipt via electronic invoicing brings many benefits, fundamentally in reducing the process time. The average paper invoice receipt cycle is 12 days, while that of an electronic invoice is 0.5 days.
However, the tasks related to the reception process and paper management take up only 30% of the time. What happens with the other 70%?.
The remaining 70% of the the time is take up with tasks of account coding, invoice matching and above all solving exceptions. The deeper the automation in these phases, the more effective, quicker, error free and cheaper the final process.
Electronic Invoicing in client cycle.
We don't stop to think very often that the problems we have withinvoices from providers , our clients have with our invoices. Taking into consideration how my invoice affects the accounting process of my clients, the information needed, the format most suitable for their needs, in conclusion how can I help them in their accounting processes is the guarantee of success.
Electronic Invoice Processing: Cost, What should the price be and who should assume it?
- - The cost of issuing an invoice on paper is €1.95, the cost of issuing an electronic invoice is €0.50.
- - The cost of processing a received paper invoice is €7, the cost of processing a received electronic invoice is €3.50.
As there are not many business processes in which there exists a potential saving so high, why do 77% of the electronic invoicing processing projects produce saving less than 10%? The answer is in the cost model and the level of implementation.
It is common practice in the received invoice cycle to attempt to impose an invoice protocol on providers, a format or even in certain sectors to share part of the cost of processing the invoices.
This type of approach is only undertaken, and not very well, by some providers, those in which their size or level of dependency, does not allow them to refuse.
Not offering protocols that favor the provider's process or that bring added value, transparency and information lead to lower levels of implementation and therefore less potential savings.
A free model for the provider, bringing added value to their current process will allow a greater saving in less time.
But what should be the cost model for the company who implements the service?
The externalization of the service brings great benefits in the two variables which affect the success for the project:
- Reduced period of implementation and adaptation to the regulatory changes as part of the service
- Variable cost model instead of fixed model: the pay per invoice model and the absence of setup costs mean greater savings.