Insight & research

• Corporate Priorities and Challenges
• Manufacturing Focus: Managing Materials Prices
• Perspectives
  • Simplifying Complexity
  • Working Capital
  • Perspectives on Operating Risk
• Responding to Recession report
• The Shape of British Industry
• Harvard white paper and podcasts
• International Business Insight
• RBS Group Economic briefings
• InFocus

Specialist support

• Complete cash management review
• Guide to selling a business
• Pension scheme planning
• Managing financial risk
• Contingency planning
• Corporate and personal investments

Reports & resources

• Your Liquidity review

For most organisations there is great potential to deliver cost savings and process efficiency by switching to e-invoicing.

Treasurers’ increased focus on making working capital management and cash management as efficient as possible is driving the growth of e-invoicing. Furthermore, the recession has spurred businesses into seeking new ways to improve key financial ratios such as Days Sales Outstanding. In this article John Lyons, Head of Global Transaction Services UK, explains how e-invoicing can improve efficiency, reduce costs and optimise working capital.

E-invoicing has been a buzzword in the business for years, but now corporate customers are starting to realise the real value that it can offer. E-invoicing has long promised cost savings and efficiency gains, but now the technology platforms are in place, banks are ramping up their services, and corporate and commercial customers are ready to bring their supply chain partners into the new environment.

As with any technological innovations, e-invoicing raises its fair share of opportunities and challenges. After many years of discussion, however, banks have made much headway in overcoming the challenges and maximising the opportunities.

‘Companies can remove paper from the invoicing process, they can validate and process invoices quicker and they can make better decisions about when to pay suppliers or bill their customers. E-invoicing is simply cheaper, faster and better,’ says John Lyons.

Streamlining invoicing in a secure and compliant fashion
E-invoicing is an electronic service which facilitates the exchange of information between buyers and suppliers. It allows invoices and related documents to be issued, received and reconciled electronically and can be deployed within either an accounts payable or accounts receivable environment.

‘Interest is growing all the time in this service,’ observes Lyons. ‘We have been in research and piloting mode for a number of years and the service has now been fully live for 18 months. It is certainly a hot topic in the UK, especially in the public sector, as companies look to streamline their invoicing, and companies are motivated by moves being made by the EU to encourage that,’ Lyons added.

Larger organisations are leading the way, but size doesn’t matter
E-invoicing is still in its infancy, but large organisations with a high volume of invoices are leading the way. They are proving the concept for smaller companies, which will eventually follow suit. Lyons notes that RBS, for instance, is already building its SME offering, which he believes is vital for the development of the market. To generate maximum efficiency, e-invoicing needs to cover all points on the supply chain.

‘It is easier for big organisations to push e-invoicing with customers and suppliers. They lead the way and it trickles down. It is important that any e-invoicing service works for organisations of all shapes and sizes. We are currently selling to larger corporations to help them with their billing decisions, but they must connect to all kinds of customers and suppliers,’ he remarks.

A robust platform
Technology is, of course, the key enabler of e-invoicing. In 2008, RBS chose to implement technology from Accountis, a division of Fundtech, as the foundation of its VAT-compliant, branded service.

The Accountis electronic invoice presentment and payment (EIPP) technology comprises Accounts Receivable (AR) and Accounts Payable (AP) trading hubs, which consolidate data from disparate billing systems and bring invoices directly into the bank’s financial systems. The technology provides detailed information on the status of each invoice (or purchase order), and also enables real-time dispute management in the event of a query.

As well as automating manual processes, enabling real-time document management and faster settlement, the technology also provides a basis for optimising working capital management.

Data security is top on the agenda
Lyons understands why corporate clients may have concerns about making the transition to e-invoicing. However, he can reassure them that issues such as data security have been thoroughly addressed by the systems and by the governance processes of the banks providing such services.

‘There have been barriers to uptake, and security is certainly one of them. You don’t want to rely on an invoice if you can’t verify its authenticity. We’ve addressed that by using rigorous and proven security protocols. We use digital signatures, which give the receiver confidence that the sender is who he says he is,’ remarks Lyons. ‘Paper invoices arriving in the post may feel more comfortable, but they are also vulnerable to the risk of fraud. The internet is not necessarily a safe place, so we have taken steps to ensure the security is inherent in an unobtrusive way to give our clients the trust and certainty they need,’ he adds.

Smooth transition rather than ‘big bang’
Companies that have confidence in the security of e-invoicing technology and accept that there is a robust approach to access control and invoice validation may still have concerns about the process of transition to a new environment in a part of their business particularly for important areas such as invoicing and payment. Lyons can once again reassure them that even in today’s challenging markets the transition is not only worthwhile, but can also be handled with minimal disruption.

E-invoicing requires buy-in along the whole supply chain, extending beyond a bank’s clients to reach their customers and suppliers, and that the transition should, therefore, be steady and measured. Starting that process now, before the anticipated economic recovery, could be important in preparing a business for better trading conditions, as well as accruing efficiency gains from the early stages of the project.

Banks are working hard to ensure that the process of transition is as painless as possible. RBS, for instance, has focused on ensuring that suppliers are required to make very few changes, and that there is no restriction on the format of invoices. It offers a range of applications to suit companies of different sizes and with varying levels of technical capability.

A small organisation used to sending an invoice as a Word document can use a simple web screen to input the data, while Purchase Order Flip feature allows companies to receive electronic purchase orders that are automatically converted into invoices.

‘If the company has an accounting system printing invoices then we can capture the data before printing, digitally sign it and send it. We can also map and reformat data from different file formats, like ASCII or XLS, in an automated way. Or companies can use the internet to have servers talk directly to each other. It is important to find the right solution for each company,’ explains Lyons.

Hard work is needed to make the transition, and there is a phenomenal range of formats, but a bank can work with its customers to refine and develop its service. At RBS, we will shortly be introducing a service that enables clients to be fully electronic from day one. A buying organisation can receive paper invoices from the suppliers, which are sent to a PO Box. We scan them and process them electronically. It may take time to set up the electronic connections for a client, but our two-step approach means our clients can get the benefits quickly while we help them make the transition to fully electronic systems.

Counting the cost savings
For most organisations there is great potential to deliver cost savings and process efficiency by switching to e-invoicing along with key suppliers and customers. The scale of these gains will, however, vary depending on the company’s size, complexity and existing invoice processes.

Banks such as RBS recognise that most corporate clients will be able to make improvements in some areas of their invoicing workflow by automating manual processes or improving the communication between accounting systems. The challenge for banks is, therefore, to help those companies to develop their own, unique model for e-invoicing rather than trying to develop a one-size-fits-all solution.
‘Savings are usually possible in areas like the re-keying of data, tracking and fixing inaccuracies, and simple things like postage, copying and printing costs. Small discrepancies can be costly when matching invoices to orders.

‘The e-invoicing service RBS provides complies with the local tax regulations with respect to deliver of invoices online. Customers don’t need to worry about understanding and implementing technology in line with complex compliance directives and the service removes this headache for them. Our approach to pricing is to charge our clients, but not charge their suppliers to sign up and use the service. This approach is vital to ensure suppliers adopt the service and our customers can then maximise their efficiency gains from use of the service.’

E-invoicing to roll out in Europe
The market for e-invoicing services is steadily building towards critical mass, and ultimately banks will look to extend their services across geographical boundaries. RBS, for instance, may currently be focused firmly on the UK, having taken the lead among banks in developing a suite of branded services, but it recognises the potential to expand into Europe in the years ahead.

Lyons notes that the technology underpinning RBS’ UK offering is already working in nine other jurisdictions. The platform is there, but it will take time and effort to develop service offerings, which must have a local focus in each country, in the same way that an individual corporate client may need a unique blend of applications to bring them into the e-invoicing arena.

Future growth of e-invoicing
A new EU directive to promote the benefits of e-invoicing and pay for electronic invoices equally will be implemented in 2013. That will help to smooth the way for wider scale adoption.

Public sector cuts in the EU will drive strong adoption within government organisations, which are now beginning to use e-invoicing. They recognise the benefits they can achieve both in efficiency and revenue management. Some EU governments, such as Finland, Italy and Denmark, have mandated the use of e-invoicing and we’ll see wider adoption of it within the EU as the benefits in those countries become clearer.