E-invoicing has many benefits for both suppliers and buyers, but I would say that wouldn't I. Yes, I might have a vested interest, but this piece aims to outline the benefits of e-invoicing and to describe how to overcome the barriers without disrupting your supply chain. It should be stated from the outset, that e-invoicing needs to be as simple as possible for the supplier to use, to ensure high adoption.

I am talking about an invoicing approach, which is already ubiquitous and second nature to every organisation - in fact it's the second most popular way to invoice today, after paper. Unfortunately, most organisations in the hospitality sector do not seem to be aware of the automation possibilities that present themselves by using the data that lies, literally in front of their eyes.

Yet, it's important to acknowledge that the hospitality sector is unique. No other industry is so service led, where the small personalised touches can make or break a business. No other industry is as far ranging in business type, from international hotels to bijou cafes, chain restaurants to major airlines. No other industry is so affected by the global economy and changing purchasing patterns.

It is for this reason that line-level invoice data is essential to hospitality businesses. There is a big push in the hospitality industry for management information (MI) to enable business improvements; to gain more foresight, become less reactionary. In my opinion e-invoicing will enable hospitality businesses to drive efficiencies in their back offices.

The problem with the traditional paper process
A traditional paper-based purchase invoice process consists of several manual activities: the supplier raises the invoice in their finance application; they print it out, place it into an envelope and send it on its way in the post. Their customer receives the post, opens and sorts the mail items and enters the invoice details into their accounting system. The manual activities don't always stop there as the invoice is often photocopied or scanned, with the copy invoice sent around the organisation for approval for payment.

Though it is not just about removing manual activities and the cost savings this will deliver. E-invoicing also enables greater control and visibility within the finance function and increases the ability for the buyer to pay on time and take advantage of supplier discounts. These benefits have been discussed – and more importantly realised - many times before. But for an organisation to realise them, it is clear they must convert suppliers from paper to electronic.

Benefits are realised by both the buyer and the supplier when trading electronically. Electronic invoices are received straight into the buyer's processing application, within seconds of it being sent by the supplier - eliminating the need for any costly, slow and labour intensive activities. The nirvana of straight through processing – where an invoice is received and processed without any human intervention – becomes an achievable goal, when e-invoicing is partnered with a robust P2P process.

I have thousands of suppliers, where do I start?
Focus on the suppliers that will generate the greatest benefit. An e-invoicing programme should not be distracted by measuring onboarding rates across all suppliers a customer trades with. If a supplier only submits two invoices a year, is it going to make a material difference to the benefits case by not receiving e-invoices from them? At the outset, effort should be spent making sure the right type of supplier – those that will deliver the greatest value to the customer – are identified and prioritised.

Usually, prioritisation is driven by invoice volume. A supplier who is sending 1,000 invoices to you, in almost all cases will provide more value as an e-invoice supplier, than a supplier providing 10 invoices per year. In many organisations, a relatively small number of suppliers will be responsible for sending most of the invoices. Although this can vary by industry sector and organisation, it is not uncommon to find that as few as 5-10% of suppliers, represent 60-80% of the volume.

In real terms this is often less than 200 suppliers. So, are we saying a successful e-invoicing project can be measured by the number and profile of the suppliers that move to e-invoicing? Though true, we should not forget that it is also about the time taken to get them to convert from paper to electronic to ensure the benefits are realised as quickly as possible.

High adoption of the suppliers that matter is one of the most important factors to a successful e-invoicing project. The more electronic invoices you receive, the less paper remains in the business. The quicker you can get your suppliers on-board, the sooner you will realise the benefits. So why is there often such a low take-up of e-invoicing particularly with small to medium size suppliers? In short there are several barriers, perceived or otherwise, to supplier adoption which need to be overcome.

The technical change suppliers often must make
Many e-invoicing service providers require invoices to be produced and sent as an XML or EDI file. Although these files are very structured, producing them may require the supplier to make costly and difficult changes to their billing applications and infrastructure. These changes can restrict all but the largest organisations with the budget and invoice volumes needed to justify the changes.

The change often needed to the suppliers operating processes. As an alternative, some e-invoicing providers offer an on-line option where the supplier can enter the invoice directly into the service provider's portal. An e-invoice data structure is generated from the data that has been entered and delivered to the buying organisation.

On-line portals avoid the necessity of changing applications and infrastructure to send EDI or XML documents - but they do require the supplier to raise their invoice in a 3rd party website. If a supplier already uses an accounting package to record their invoices, the question must be asked: "why would they want to duplicate effort by first raising the invoice in their own finance application, then again in a 3rd party portal?" Unless the supplier is a micro business without their own finance application, invoice portals add complexity and duplication to the supplier's billing process

Financial cost to the supplier
Both above invoice submission options come with financial implications, either, the investment needed to change applications and infrastructure to send EDI or XML; or additional overhead costs to cover time and effort to support invoice portals. Add to this the charges that are levied by some e-invoice service providers on the sending organisation and it's easy to see why suppliers often can't justify the financial investment needed to support e-invoicing initiatives.

The net result of these barriers is that supplier adoption is impacted, leaving suppliers that are either too big to utilise on-line portals or too small to change their systems to send XML / EDI – to remain on paper. We refer to this group of suppliers as the "Massive Middle" – which can often map to 80-90% of invoice volume.

Overcoming the barriers to guarantee high supplier adoption
For an organisation with experience of working with a traditional e-invoice service provider, the challenge of; "how to remove the barriers to onboarding to maximise supplier adoption", is likely to be viewed as a complex and difficult one. However, as is often the case with complex problems, taking a simple, fresh approach can result in a simple and easy to use solution

As finance professionals across the world will attest, almost all accounting packages can generate a PDF invoice – with most also being able to email the PDF invoice straight from the application. What many people may not be aware of though is that when an application generates a PDF invoice, in almost all instances it will be a text PDF with the key document data such as invoice number, line quantity and price, embedded within the PDF as put there by the original generating application.

By using the latest e-invoicing technology, the raw invoice data within the PDF can be mapped (no OCR) to an e-invoice structure - making this approach akin to mapping one flavour of XML to another flavour of XML! As almost all accounting packages can generate a PDF* – and as email is the default way to communicate – by allowing suppliers to email their invoice to you and use your e-invoicing solution to map the data embedded within the PDF to your preferred e-invoice structure, the barriers to supplier adoption are removed:

  • Suppliers don't have to change their applications or infrastructure to send EDI or XML files
  • Suppliers don't have to log onto a portal in order to create and submit their invoice on-line
  • Suppliers don't have to invest in technical changes or cover additional operating costs caused by inefficient processes. * Although PDF invoices are by far the easiest and most common way to raise an electronic invoice, the best solutions can receive and process any data document, including; PDF, HTML, XLS, XML, EDI, DOC etc

Where does this leave supplier adoption?
Those suppliers that may be too small to justify the changes needed to billing applications or infrastructure to send EDI or XML files – or too big to justify using portals to submit their invoice – are suddenly able to participate in e-invoicing initiatives by simply emailing their invoice to you.

As mentioned at the outset, this is not just a marketing message from a service provider with an agenda to promote. PDF invoicing is already ubiquitous – though unfortunately most are not taking advantage of the automation possibilities that present themselves by using the data that lies literally in front of their eyes.

For further information on e-invoicing go to:http://www.cloudtradenetwork.com/ or contact one of the team at https://www.cloudtradenetwork.com/contact.

David Cocks is CEO for CloudTrade. CloudTrade is one of the fastest growing e-invoice and e-document networks, connecting over 150 organisations to thousands of their trading partners electronically across numerous sectors and regions across the globe. Founded in 2010 to offer a fresh approach to e-invoicing, CloudTrade enables companies to evolve past their reliance on paper and trade electronically with their suppliers, irrespective of size or technical maturity. CloudTrade"s unique, patented technology, delivers services not widely seen in the market, in a cost-effective way.

David Cocks
CEO
CloudTrade