Cross-border eInvoicing in eRegion – Banks and Technology Providers

Perspective

Franc Bračun, PhD

Merkur Day 2004

A B A N K A

Friday, 22nd October

Speakers

Chair: Dr. Franc Bračun, Executive Director Branch Network, Abanka Vipa, Ljubljana, Slovenia

Speakers: Mag. Martin Mihelčič, Director of Card Business & eBanking SKB banka d.d. - Société Générale Group Mr. Kari Korpela, eBusiness Project Manager Technology Centre Kareltek Inc., Lappeenranta, Finland Ms. Andja Komšo, Adviser to the Government Head, Department for Organization and Development of Information Technology Tax Administration, Ministry of Finance, Republic of Slovenia Dr. Tomaž Domajnko, Director, IT Research & Development SRC.SI, Systems Integration, Ljubljana, Slovenia Mr. Tomaž Kavčič, Executive Director eBusiness Unit, S&T Hermes Plus, Ljubljana, Slovenia Mr. Janez Uplaznik, Director Mikropis Holding, Žalec, Slovenia

Background

There are many aspects to electronic commerce and trading. Being able to present and pay invoices electronically is an obvious element of this, but until recently one of which few organizations have taken full advantage.

In most organizations today, invoices are:– raised manually– printed on paper and – posted to the customer

When the payment period has expired, the supplier will contact the customer to ask why no payment has been received and will here one of the three answers:

– There will be a dispute over the order, necessitating a process of checking, adjustment and final agreement

– the invoice will be somewhere between the desk of the person who placed the order and the accounts department

– The payment will be about to be settled via the payment system

This process is time-consuming and cost-inefficient.

Evidence of the Need for Change

The bank with 200 people to repair the 30% of payments that they have set up incorrectly;

The insurance company with 90 people to answer the 1 million phone queries it receives annually from suppliers chasing payment;

the supermarket group which cannot reconcile up to 5% of its spend on goods for sale with the invoices it receives;

the procurement organization that rejects 3,000 invoices per month due to incorrect charging information;

the same organization that creates over 1,000 new supplier records each year on its accounting systems;

the drugs company that churns annually 40% of its clinical trial suppliers due to disputes over payments.

A list of such horrors could be drawn up from organizations in every industry.

Key Business Needs

Purchasing control, efficiency and contract compliance are key to businesses.

Critical elements to achieve these are electronic payments and invoicing solutions.

These need to be practical, and integrated into the end-to-end buying process for use by all within it, not just the accountants.

The First Key Point

Focus on optimizing the end-to-end supply chain business processes that require invoicing and payments, not on

isolated solutions.

Select

Offer

Order

Process Order

Receive

Dispatch

Fit

Invoice

Pay

Reconcile

Reconcile

Reconcile

Reclaim VAT

Pay VAT

Supply Chain Operations

Tax

Treasury

Finance and Accounting Operations

Seller

Procurement

Supply Chain Operations

Tax

Treasury

Finance and Accounting Operations

Buyer

A clear channel strategy and policy for using channels are required

Invoice Channels

Card Payments EDI Electronic Invoices

– Electronic file transfer– Electronic invoice

presentment– E - mail– Magnetic media/CD-ROM– XML

Paper Invoices Self Billing T&E Card

Payment Channels

Bank Branch Charge Card Cheque EDI

– Electronic Payment Initiation

– Electronic Funds Transfer

Internet Banking Telephone PC Banking Purchase Card

People, Processes & IT Systems

Organization Procurement Supply Chain Operations Finance and Accounting Treasury Tax

Establish a clear ‘channel’ strategy – one-size fit all solutions are impractical in large and in complex supply chains. Different solutions are needed for different

areas of spend and for different supply chains.

Electronic Invoice Presentment and Payment (EIPP)

With an EIPP system money transactions can be handled end-to-end electronically over the Internet, from rising the invoice to collecting the money.

Areas to Address

Cost savings through process and administrative efficiencies (e.g. studies in Europe have identified process cost savings of 60% - 77% when purchasing cards have been introduced in specific areas), and through improved deals based on better information and service with

Improved customer and supplier relationships through reduced exception processing and queries, and better information

Reduced working capital through improved collections and better use of discounts.

Be innovative, but take one step at a time - focus on areas of tangible benefits such as the manually intensive processes

that generate non-added value activities.

Barriers to moving forward

Barriers that need to be overcome before this critical mass occurs include:

– A lack of widely accepted standards for interoperable solutions– The need for adoption of widespread and low cost supplier/customer/bank

connectivity– Migration away from traditional, high-cost EDI networks to innovative, low-

cost internet-based– Upgrade of banking infrastructures to allow processing of the new payment

schemes needed to support electronic business processes– The need for a growing number of case studies of successful electronic

payment and invoicing implementations– Changes to executive perception (payment and invoicing processes are

boring utility processes that add little value and are generally not broken – so why change?) and greater executive appetite to innovate.

Functions and Features

Features and functions to consider are:– Exception processing and dispute management features– Payment schemes (e.g. bulk, guaranteed, conditional)– Clearing system integration – direct debits and credits– XML messaging (to accommodate multiple, organisation-specific

invoice formats)– ERP purchase-to-pay processes for large repetitive orders from

key suppliers (often purchase orders against a contract)– Public Key Infrastructure security for electronic transactions– Hosted vs. in house operated applications– Email notification of receipt/sending.