Is it time to say goodbye to the invoice?

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Within technical and finance circles, some experts are promoting the idea that organisations should be progressing to ‘pure’ eInvoicing. In other words, you stop using documents – even electronic documents like PDFs - completely. Only the invoice data is sent to the customer. This data is automatically uploaded to the customer’s ERP or finance systems, without any human intervention whatsoever.  The cost and productivity benefits appear compelling. So does this latest development sound the death knell for the invoice as we know it?

‘Pure’ or ‘structured’ eInvoicing, in this context, involves organisations sending just the invoice transaction data (sender address, VAT number, invoice amount and so on) in a format that can be automatically read and processed by their customers’ ERP and finance systems. The invoicing data can be viewed on screen for managing internal approvals, but the invoice itself doesn’t actually exist as a paper or electronic document.

From the recipient’s point of view this eliminates the need to have people re-keying the invoice data into their systems - meaning time savings, greater efficiency and less risk of human error. From the sender’s perspective, the invoice information is sent in seconds, increasing the prospect of timely settlement - and there are no postage, paper and print costs. And of course there is the environmental benefit of a reduced carbon footprint.  

While this all may seem like a simple ‘no brainer’, not everyone has bought into the idea. Many organisations may have moved away from issuing paper invoices, but still stick to the half-way house of  sending invoices as electronic documents (typically PDFs) that can be opened and read by people (printed off if necessary as a local copy – at no cost to the sender) – and not automatically processed by machines.  

So why do we need invoice documents at all?

  • Resolving disputes

People deal with people, and documents put data into context for both sides.  99% of transactions should be electronic in a perfect world, but when there is a problem, then what is needed to help resolve it?  Documents. The recipient company will want to be able to call their supplier with the physical or on-screen document in front of them and say for example: “I have a query on line X of the invoice, we didn’t receive those products,” or “Can you please send us the signed Proof of Delivery relating to that invoice item?”. With copies of the same document in front of them, the two parties can get to the root of an invoice query and much more quickly find a resolution.  

  • Customer acceptance

‘Pure’ eInvoicing which involves transactional data flowing between senders’ and recipients’ finance systems can't be introduced in a ‘big-bang’ approach in many industries. It is only going to be as successful as customer acceptance will allow. In many sectors not all customers will have IT systems geared up to processing invoice data (think of smaller customers who still run paper based systems - such as sole traders - small building firms for example). Hence the need for an approach which allows progressive migration based on customer preferences: multi-channel invoice distribution which includes paper and electronic documents as well data (for those who can process it). Over time, the volume of print should decline as migration to electronic delivery is encouraged through suitable promotions.

  • Auditable record keeping and query resolution

Despite all the advances in technology, society seems to have become far more focused than ever on security and compliance.  So auditable records of transactions are essential - and this is often satisfied by… yes, documents (either paper or electronic). Electronic documents can be time stamped and have audit trails to confirm they have not been tampered with.

For example, one Macro 4 customer offers transactional invoice data to many of its larger customers AND still archives electronic copies of all invoice documents because it’s easier for the Finance department to use documents (electronic or paper) if they need to present information to an auditor or resolve a VAT query. All documents are available to the credit controllers as well as its customers through a self-service web portal - and documents are retained even in cases where there never was a paper or PDF original sent out because it’s far easier to handle customer queries using documents rather than transactional data.   

  • Standards

When companies exchange invoice data between their finance systems it is typically done using Electronic Data Interchange (EDI) or XML (extensible markup language), designed to support transmission of information over the web. But the problem is that EDI is typically designed for ‘heavyweight’ requirements in specific industry sectors such as manufacturing, and there is no single global (or even UK) standard for exchanging XML invoice data. This means company A’s finance system will not necessarily ‘understand’ company B or C’s invoice data without using specialised software to help their system interpret the data provided by all of their different suppliers.  

Some industries have created their own XML standards, and companies operating across industries have done the same (OB10 provides a network for supplier invoices, and F4F is a standard in the farming world, for example).  However, until there are widespread standards for invoicing data, it is hard to imagine we’re all going to ditch invoice documents overnight.

The truth is, until widely accepted invoice data standards emerge and all organisations (large and small) have the financial IT systems in place to process transaction data, we’re unlikely to see the end of invoice documents. And even when those issues are resolved, it is likely that we’ll want to hang on to documents for reasons such as dispute resolution and record keeping. 

For successful eInvoicing in the real world you need to offer invoicing across all delivery channels in tune with customer demand, and have the flexibility to migrate the data format to current and new standards for electronic invoicing as they emerge. Even if the original invoice being sent is purely transaction data, a well thought out approach will still ensure an archive copy is retained as a document – try taking these away from your credit controllers!

About Lynda_Kershaw

About Lynda_Kershaw

I’m Lynda Kershaw, marketing manager at software and services company Macro 4.  We help finance departments control their running costs and improve performance against key measures such as day sales outstanding (DSO), aged debt and unallocated cash. At the same time we help them meet rising customer service expectations and increased demand for paperless invoicing.

We do this by streamlining document management, minimizing paper handling and easing the transition to electronic delivery throughout the order to cash process. We offer a suite of integrated software modules to do this.

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