The Basics of Electronic Invoicing

The Basics of Electronic InvoicingThe Basics of Electronic InvoicingNigel Taylor

Head of e-Invoicing Solutions, EMEANigel Taylor

Head of e-Invoicing Solutions, EMEA

Slide 2 © 2011 GXS, Inc.

Agenda

The basics of electronic invoicing for buyers and sellers

Compliance today and tomorrow

Community enablement

How to build a business case


Paper Is Still the ProblemCompanies Continue To Send and Receive Paper Invoices

Source: EC Working Group, 2010

Paper invoice processing: $25-84 per invoice, 10-55 day cycle

Approx. 16bn B2B invoices in Europe

€200bn in corporate savings possible in Europe

Approx. 12bn B2B invoices in US

$230bn in corporate savings possible in US


Typical Benefits of Invoice Automation

Source: The E-Invoicing Solution Selection Report, Aberdeen Group

Improvement Area Performance Impact

Invoice Processing Cost Reduced 30% – 90%

Processing Cycle Time Reduced by 65%

Accounts Payable Labor Reduced by 25% – 40%

On-Time Payment Percentage Improved from 15% to 59%

On-Time Earning Discounts Increased up to 500%

Supplier Participation 70% – 90% on average

Invoices Received in Electronic Format Improved 55% to 90%

Why Change?Compelling Cost Savings Potential


Cost of processing paper for the buyer$25.50 per invoice

Buyer e-invoicing cost$9.70 per invoice, 62% savings

Cost of processing paper for the seller$16.08 per invoice

Seller e-billing cost$6.80 per invoice, 57% savings

Source: Billentis, 2010

Why Change?Compelling Cost Savings Potential


What Is the Invoicing Process?Different Perspectives for the Buyer and the Seller

You order the goods or services

You get the invoice

You pay the supplier

Order to Pay(Buyer Side) Order to Cash

(Seller Side)

You ship the goods or services

You send the invoice

The customer pays YOU

Your Business


Challenges for BuyersThe Cost of Processing Paper

Creation of invoice by vendor

Delivery of invoice to buyer

Sorting and routing of invoice to A/P

Entry of invoice into A/P system

Verify and augment vendor data

Validate math on invoice

Match invoice to order,

receipt & contract

Assign to cost centers

Ensure correct tax treatment

Determine approval authority

Circulate invoice for approval

Resolve disputes with vendor

Monitor status of approval

Record expense in general ledger

Store and archive for audit purposes

Respond to vendor status inquiries

Evaluate and negotiate trade

discounts

Aggregate payments due to

vendor

Release payment

Send instructions to bank

Distribute remittance advice

to vendor


Who Needs e-Invoicing?Buyer Side: Each Department Has Different Objectives

Minimize resources required to support e-invoicing functionality

Ensure secure connectivity and data transmission

Globalization/centralization of 3rd party providers

Improve AP performance metrics Eliminate manual processes to

focus on value-add activities Issue comprehensive remittance

data and reconciliation services to suppliers

Increase internal process visibility Meet tax and regulatory

compliance Meet green initiatives

Increase cash visibility and forecast accuracy

Optimize working capital

AP

IT

Institute checks and balances Conduct compliance reporting

more easily

Audit

Treasurer

Ensure a stable supply chain Manage spend and supplier

relationships Seize early payment discount

opportunities Ensure contractual and

regulatory compliance

Purchasing


Challenges for SellersThe Cost of Processing Paper


Who Needs e-Billing?Seller Side: Sending Invoices Costs Large Volume Sellers Money

Minimize resources required to support e-billing functionality

Ensure secure connectivity and data transmissionIT

Increase cash visibility and forecast accuracy

Optimize working capital

Treasurer

Institute checks and balances

Conduct compliance reporting more easilyAudit

Improve AR performance metrics

Eliminate manual processes to focus on value-add activities

Improve reconciliation Increase internal process

visibility Meet tax and regulatory

compliance Meet green initiatives

AR


Global Compliance ChallengesThe Global Importance of Indirect Taxes

With over 150 countries VAT/GST is the main transaction tax in the world

A steady transition from sales tax to a VAT system

Source: Deloitte, 2011


Digital Signature and Security

Digital Signature and SecurityVAT ComplianceVAT Compliance

Invoice data complies with country-specific tax authority rules

Digital signature complies with country-specific tax authority rules

Guarantees identity of sender, authenticity and integrity of invoice

Global Compliance ChallengesBuyer and Seller Must Meet Each Tax Authority’s Requirements

Archiving and AuditArchiving and Audit

Invoice archive complies with country-specific tax authority rules

Management information for buyers, sellers and auditors


Insulate company from complex existing and

emerging regulations

Provide visibility to invoice data to

multiple parties of interest

Invoice data needs to be viewed internally for SOX or SAS70 compliance as well as externally by tax authorities for tax compliance

Multiple repositories and formats hinder visibility

Existing tax compliance solutions ensure correct goods & services invoice structure but not delivery, authenticity and integrity

Organizations must stay current on country specific electronic invoice technical and business requirements for tax compliance

Who Needs Compliance?Buyer and Seller Must Meet Each Tax Authority’s Requirements

Reduce risk by enabling tax reporting in

accordance with tax regulations of multiple countries

Local business groups implement disparate, localized solutions

Ensure invoices are auditable by appropriate tax authorities to ensure company can reclaim VAT and avoid fines for non-compliance.

─ VAT can account for approximately 20% (EU average) of total invoice amount

Reduces risk of fraudulent activities for both parties


EU Compliance Today and TomorrowCurrent EU Recommendations Have Been Interpreted Differently

Middle-WayLess rigid rules

France*Luxembourg

BulgariaDenmark

PrescriptiveRigid rules

focus on form

GermanySpain Italy

HungaryAustria

Advanced electronic signatures with qualified electronic certificates

Secure signature creation devices

Summary lists

2 methods recognized– EDI in a VAN

according to 1994/820/EC

– Electronically signed

Advanced electronic signatures preferred

* France recognizes unsigned EDI through 289bis

FunctionalRelaxed rulesfocus on result

UKFinlandSweden

NetherlandsBelgium

3 methods recognized– EDI in a VAN

according to 1994/820/EC

– Electronically signed– any other means

Any other means as long as authenticity and integrity are guaranteed


EU/2010/45 – New EU directive on electronic invoicing EU Member States are to adopt a new directive which is designed to increase the

use of electronic invoicing by 2013

The current application of the rules on invoice requirements across Europe is inconsistent

The new directive means: Electronic invoices will be equally valid alongside paper invoices

Rules for guaranteeing authenticity and integrity have been relaxed

Established business controls and a clear audit trial are known as alternative means

What is certain? There will be two clear forms of electronic invoicing:

– EDI in a VAN according to 1994/820/EC

– Digitally signed documents

Each alternative means method will be subject to scrutiny by the tax authorities

EU Compliance Today and TomorrowRecent EU Recommendations – Intended To Simplify Electronic Invoicing


Community Enablement


Community OptionsOne Size Does NOT Fit All

OCRMicrosoft

OfficeWeb

FormsIntegration

Broker

EnterpriseResourcePlanning

Small Mid-Size Large

DesktopTranslator

SMBAccountingPackage

SOHO Very Small Small National Global

Size of Trading Partner

Medium

Complexity of B2B Enabler

MobileDevice


Your Supplier and/or Customer Community

How much do you know about them?

Which products do they provide?

What are their technical capabilities?

What is their compliance status?

Do you have all their contact data?

How do they update you and in what format?

Do you communicate and

monitor?

Have you asked their opinion?

Do you have to talk to multiple suppliers on single projects?

Have you measured their performance over time?What will help them?

Change management Self service Purchase order presentment Invoice submission and status

Companies spend up to $1,000/supplier/year to manage trading partner information alone. (Gartner/AMR Research, May 2009)


How to Build a Business Case


Understand your return on investment How many invoices are processed by Accounts Payable yearly?

How many FTEs are dedicated to this task?

How much time is spent manually processing invoices in the mailroom?

How much time is spent manually keying data from paper invoices or scanned images?

What are the costs of paper archive and storage?

How easy is it to “scale” in-line with your organization’s predicted growth?

How much time is taken resolving supplier inquiries?

Buyer Business Case


What are the implications of having little or no visibility into the process? How many missed discounts are there?

Do you incur late payment fees?

How common are duplicate/over-payments?

How accurate are your accruals?

How do you measure performance?

Will your cash forecasting benefit from greater visibility?

Does the procurement team ask for supplier performance data?

How much effort is taken compiling compliance data for your auditors?

Buyer Business Case


Understand your return on investment How many invoices are processed by Accounts Receivable yearly?

How many FTEs are dedicated to this task?

How much time is spent manually processing invoices in the mailroom?

What are the costs of paper archive and storage?

How easy is it to “scale” in-line with your organization’s predicted growth?

How much time is taken resolving payment inquiries?

How much time is taken reconciling payments?

How much time (on average) is taken to settle your invoices?

Seller Business Case


What are the implications of having little or no visibility into the process? Do customers meet your early payment incentives?

How do you measure performance?

Will your cash forecasting benefit from greater visibility?

How accurately can you reconcile payments?

How much effort is taken compiling compliance data for your auditors?

Seller Business Case


What is the total cost of ownership for licensed software? Hardware Implementation Infrastructure Disaster recovery Security Upgrades Quarterly billing and transactional costs

Business Case Challenges


What is the scope of your project? Global or pan-European? Its not just electronic invoicing Choose the right vendor

– Many are small, niche providers who cannot enable the bigger picture



Main reasons electronic invoicing projects have failed in the past Underestimating the size and scope of the

project

Poor project management

Technical focus– Process automation and

community adoption are key




Key success factors Ensuring key sponsors are aware of the wider value of invoice

automation Executive level support across countries and corporate divisions A long-term strategy, implemented one step at a time Strong communication Active supplier/customer enrolment Understand your supplier’s technical limitations and provide

connectivity solutions that fit Choosing the right technology partner

– Don’t re-invent the wheel

A go-to-guy as project owner!




PHYSICAL and FINANCIAL SUPPLY CHAIN APPLICATIONS

Invoices

Electronic Invoicing & Billing

GXS B2B SolutionsOffering Value across Physical and Financial Supply Chains


PHYSICAL and FINANCIAL SUPPLY CHAIN APPLICATIONS

DocumentsOrders Logistics

Community Connectivity Payments

InvoicesCatalogues

Data Quality Treasury

End-to-End Message Tracking and Alerting

Purchase Order Management

Global Shipping Track and Trace

Electronic Invoicing & BillingProduct List Sharing

Expert On-Boardingand Community Intelligence 20 Connectivity

Solutions Electronic Payments Complex Business Rules and Data Quality Global Cash Management

GXS B2B SolutionsOffering Value across Physical and Financial Supply Chains

Slide 30 ©2010 GXS, Inc.

Questions?

Nigel TaylorHead of e-Invoicing Solutions, EMEA

[email protected]


Thank You for Your Participation!

For More Information:Phones:

US: 1-800-334-5669, option 3

EMEA: +44 (0) 1932 776047

ASPAC: +852 2884 6088

Japan: +81-3-5574-7545

GXS web sites:

US: www.gxs.com

EMEA: www.gxs.eu

ASPAC: www.gxs.asia.com

Japan: www.gxs.co.jp

Presenter:Nigel Taylor, [email protected]