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Why is Europe reinventing e-invoicing standards?

8th Oct 2014
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Atlas Products country manager for Ireland and BASDA general council member Bill Pugsley offers some insights into the current European debate surrounding e-invoicing standards.

The EU Commission estimates that the adoption of e-invoicing in public procurement across the EU could generate savings of up to €2.3bn, with a new directive now paving the way for the development of a new European standard for electronic invoicing (e-invoicing).

An initiative originally conceived in Norway (not part of the EU) has now been re-branded as PEPPOL (Pan European Public Procurement On-Line). It is intended to deal with everything associated with electronic commerce for government procurement, with the first stage being e-invoicing. PEPPOL itself offers a supposedly ‘new way’ of moving electronic commerce transactions between suppliers and government offices yet proven standards already exist. The successful take-up in Norway was because the Norwegian government mandated that all government agencies must receive electronic invoices and thus suppliers had to conform to that mandate.

Why do we need a new European standard for e-invoicing, which may take years to develop, when the existing BASDA eBis-XML messaging standards have been around since the late 1990s? If you look further afield there is also the GS1 (Global Standard One) system of standards that have been working successfully since the late 1970’s. Organisations are happily using BASDA and GS1 Standards today because they are proven and they work – but the EU has elected to re-invent them with a consequential cost to software developers; a cost that will be passed to their customers, ‘the suppliers’ by Government.

The UK Cabinet Office has also stated that e-invoicing must be used by UK government and the English & Welsh NHS have now started to include the requirement of having the ability of delivering e-invoices for products and services as part of new or renewed contracts for supply. They have even noted that this must include using the PEPPOL Standard. However, as far as the author knows this is merely a statement of requirement – it has not been extended to mandate that the only way of delivering invoices should be electronic – so paper invoices continue to be sent!

Implementation of BASDA and/or GS1 standards provides a world-wide solution for trading in over 100 countries – not just those in the EU.

Whilst I would always welcome all efforts to encourage the use of e-invoicing, in my view the EU directive just scratches the surface and leaves many unanswered questions. My fear is that it will actually serve to delay the full economic benefits of e-commerce, which will make €2.3bn look like small change.

Most importantly, these proposals omit the most critical piece of the jigsaw, the one that unlocks the real savings and efficiencies. Sending and receiving invoices electronically is all very well, but it ignores the most crucial part of the trading cycle – the assessment of whether the invoice is for the goods ordered and received, and that the price on the invoice matches the agreed price for the goods.

What is lacking in the European initiative is the ‘perfect order’ where goods are ordered, delivered and invoiced with the only human interaction being the picking, packing and delivery of the items ordered; sending an invoice electronically without automated reconciliation against order and price merely gets it to the recipient faster. There is no certainty that it is correct.

Only with automated end to end exchange of transactions, with price matching as part of the process, can the invoice be passed for payment. The ability to automatically validate invoices is now available in the marketplace from members of BASDA. Without the inclusion of this standard feature, there will still be a need for large teams to carry out manual checks, one by one – the very same slow and labour intensive process the EU are allegedly trying to eliminate.

This seems to me to miss the point entirely. On its own, e-invoicing is just not enough.

Bill Pugsley is the Chairman of Atlas Products International. He started working in IT in 1970 and established his own business in 1973. While working in his US subsidiary in 1985 Bill was introduced to Electronic Data Interchange (EDI) and decided to re-focus his own business on delivering solutions to enable companies to embrace EDI.

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