Electronic Billing (E-Invoicing)
The topic sounds easy -
but the complex backround may have large positive impact!
The use and the benefit of electronic invoicing occures because organisations look for new ways of using new technology (and fnd them). The
automatic clearing of electronic invoicing is also used in order have the cash flow under control and optimize it while this allows a company to
improve their operational business.
The genisis of electronic invoicing
The appearance of electronic billing (e-invoicing) has considerably developed since his starting mid of 1990’s. Originally the focus was on
reducing paper- and freightcosts by generating paper-invoices in a internet compatible format, e.g. pdf. Out of this it was build quite quick a
powerful tool for the optimization of processes and due receivables for customer invoices as well as controlling of cashflow cycles. This was
suprisingly for the first users - how is it possible that by generating savings with optimized processes and improved cashflow cycles a 20x higher
return happens as the savings for paper and mailing costs can be? A steady tendency gives the answer. While new technologies have been
developed, thoses produce often more competences then originally planned. According a study of the Kovi-Group 53 percent of all companies
woule prefer to receive invoices online instead of by mail. For many of the is this ability of a vendor criteria for placing an order. But this new
volatility in the demand for electronic invoicing is not just limited to customers. Also vendors are interested to optimize troublesome invoicing- and
payment processes.
The benefits of electronic invoicing
Customers and suppliers use the electronic invoicing to accomplish
two things: first they want use a do-it-yourself application in order to
empower their own business within the single processes. Secondly
the want to improve their ability to forecast and manage their cash
cycles better and are able to ensure a best possbile business
relationship. For a customer it means that he is able to upload
automatically invoice details efficient and broad without big efforts.
And this easy as possible (independent from the question whether
you operate with a large ERP System or with a solution for small-
caps). Same way customers ensure that they can negotiate best
possible advantages for discounts if for example cash-discount is a
topic and thefore payments can be managed with utmost best
possible efficiency if less cash is available. Or just to pay in time, not to early and too late.
For a supplier it means to provide his customer fast and ongoing access to the invoice details in all possible formats they need to manage
eventual complaints fast. Tus, not to strain the payment days unnecesseraly and to acknowledge, when and how payments are received that an
exact payment process can be obtained for a best possible forecast of the liquidity plan.
Automatism is well-rehearsed attribute of electronic invoicing. Just recently organisation explored that those informations can be used perfectly for
cash flow forecasts and the respectiv control. As electronic invoicing has meanwhile a stake of 30-40% of all payment processes (in larger groups
even up to 90%) in grow increasingly, customer and supplier start to analyse when and how payments shall be performed and received. Realtime
information about payment characteristics, claim management, seasonal impacts, cycles, sensitivity of the amounts, use of payment conditions
(e.g. 10 adys 2% discount, 30 days net) are now provided fast to finance- and treasury teams. This again leads to better accuracy for finance- and
liquidityplans (see also our article about planning).
Especially suppliers have now a good opportunity to manage incoming payments by electronic invoicing much better than before. This because of
better overview and introduction of effcient automatized processes. An electronic payment system monitors in real time all outstanding receivables
and produces a high level prediction of future cash flows. Additionally payment conditions (e.g. supplier discounts and additional charges)
changed in real time to improve the payment behavior. In case a supplier need urgently cash he will increase the cash cycle when he grants
discounts of open invoices by informing the customer immediately. Within the paper world this would be much to complicate and may not be
manageable. Agreement deals like the invoice itself became more dynamic due to fulfill the needs of the operations.
A company case study: Office-Depot
Office Depot, a US office supplier is a good example how the electronic invoicing can achieve good results above paper- and mailing costs and
brings new benefits.
As Office Depot started his implementation in 2001, the focus was on the reduction of paper- and mailing costs which happen by printing the
invoices a second time for the event of investigations with invoices (every sales / invoicing department knows it: customer is overdue and after the
first reminder he wants to have a second invoice because the first was “lost”). As office depot now introduced electronic invoicing and started to
generate benefits from more and more characteristics they recognized the large impacts on highlevels in their business. Thousands of self-
services of the customers have been generated automatically and avoided in the following customer service calls. The outstanding invoice
amounts (DSO - see also our article about working capital management) have improved more than 20% and resulted in unfreezing 10
million of the net working capital. The yearly savings increased to over 2 million USD and topped clear what was originally forecasted.
Now is Office Depot in a position to improve their liquidity forecasts considerably and to optimize the delivery conditions for over 120’000 business
clients with simple methods.
Summary
As more customers and vendors use the electronic invoicing, as more they get together on an efficient level. Electronic sourcing systems will be
connected fix to invoicing systems and vice versa. Better delivery conditions may be negotiated with less operating funds. Customer and supplier
optimize themselve for the transparancy of their business objects as well as for the respective other’s business. Delivery conditions will be more
flexible and ensure that the appetite for existing, but freezed capital of the customer and supplier will be stimulated. In consequence it will be
ensured that both counterparties, customers and also suppliers, step into a win-win situaiton. This is actually more thrilling than archive paper.
Contact us, we would be glad to show you the possible opportunities!