E-invoicing has come a long way in the last few years, but it still represents a surprisingly small percentage of the total number of invoices processed annually across Europe, says Iron Mountain general manager Bettina Wonsag.
According to Deutsche Bank Research, only 5% of the 30bn invoices processed in Europe in 2010 were electronic. In fact, around 95% of invoice processing still involves manual data entry, which is resource intensive, time consuming and prone to human error.
E-invoicing offers huge potential for cost saving and enhanced productivity. Some studies suggest that cost savings alone could represent up to 2% of company turnover. It reduces risk and red tape and frees up staff for higher value work. It also helps to protect the environment. A complete conversion to e-invoicing across Europe would save 12m trees a year. So what is holding companies back?
New research carried out by YouGovStone reveals widespread concern over e-invoicing among financial executives in Europe.
It has found that up to a third of companies with more than 250 employees are shying away from e-invoicing because of perceived complexity and lack of standards.
These results reinforce the Deutsche Bank Research findings on e-invoicing trends across Europe, which identified a lack of legal clarity, limited interoperability between suppliers and the cost of upgrading IT hardware and software as barriers to adoption. For international organisations operating in more than one European country, the introduction of e-invoicing can be particularly challenging. Such companies face the additional headache of understanding and applying different legislation and directives - or the variable interpretation of them - across Europe. Furthermore, all companies need to ensure that statutory data protection, financial accountability and quality standards are fulfilled. It is hardly surprising that many companies are put off.
The concern about the cost of upgrading IT hardware and software is a critical one. Studies reveal that the biggest savings from e-invoicing are realised only with the use of modern, automated processes for all invoice-related tasks; processes that can be integrated with other business operations. Reviews of e-invoice adoption across Europe show an apparent correlation between the overall IT sophistication of a business and its willingness to adopt e-invoicing. This, therefore, is an important area for companies to consider.
The uptake of e-invoicing varies widely across Europe. It is highest in Scandinavia and the Baltic states – with up to 40% of firms using some form of electronic invoicing. For Italy and Germany, this figure slips to 30%, falling further to 20% for France before reaching 10% for the UK.
Having said that, there are indications that e-invoicing is starting to take off across Europe. Between 2009 and 2010, the number of e-invoices jumped by 40%. For the rate of adoption to gain pace, several important things need to happen.
Firstly, Europe needs clear technical, formatting and legal guidelines for electronic invoicing – a single set of standards to which everyone signs up and which are consistent across all markets. The research found that around one in three respondents from the UK, Spain and Germany would introduce e-invoicing if there were a single standard.
Secondly, it needs to be made easier for smaller firms to embrace e-invoicing. The barriers faced by SMEs are different to those faced by larger firms, and include organisational and skills challenges.
Thirdly, e-invoicing providers need to work together. The industry needs to enable interoperability across e-business networks and services in order to make it easier for businesses to implement e-invoicing regardless of their supplier. All this will help ensure a critical mass in e-invoicing that will, in turn, drive further adoption.
Fourth, there is a case for arguing that increased understanding and awareness may help to dispel some of the myths around e-invoicing. Websites such as the European e-invoice Gateway provide helpful, country-specific information.
Many companies receive both physical and electronic invoices in a variety of languages, formats and currencies. These businesses do not have the luxury of a clean break from one process to another and are having to patch e-invoice systems onto existing legacy infrastructure, with hardware and software that may be out of date or not ideal for the purpose.
Freed from the need to push paper around, companies can focus on doing what they do best: making the business a success.
Bettina Wonsag is a general manager of the new BPM division at Iron Mountain. The information management company specialises in offering is a secure, transparent, standardised and automated approach to invoice processing, regardless of language or format.
About Robert Lovell
Business and finance journalist