Db research e invoicing 8-2009

E-Banking Snapshot 30 E-invoicing: crown or catalyst August 2009 of an efficient billing process? Digital economy and structural change E-invoices have passed the one billion mark in Europe. E-invoices describe a variety of electronically sent invoices: They range from bills simply sent by e-mail to consumers to fully integrated payment management systems. According to Billentis, a consultancy and e-invoicing advocacy, close to 900m B2B and 500m B2C invoices will be sent electronically this year. chart 1 The market share is tiny. The number of e-invoices grew by more than 40% p.a. over the last few years. Nevertheless, e-invoicing has so far only reached a tiny market share of 5% of the total billing volume. chart 2 20% of European companies send or receive e-invoices. This is an increase by 17% compared to the previous year. However, Eurostat only asks whether or not companies use e-invoicing, not how many bills they send or receive electronically. This may distort the picture. chart 3 No clear pattern in Europe. Estonian firms are most likely to use e-invoices followed by Norwegian companies. More surprisingly, Italy has sneaked into the top group whereas Sweden is below the EU average. In fact, typical leading indicators for adoption, such as GDP per capita or latitude, have no explanatory power. chart 4 Wholesale and retail trade firms are leading adopters in Europe. That may have to do with the number of transactions and bills they work with. But the degree of business IT sophistication is also important. For instance, more than 60% of large German carmakers, which operate highly advanced systems, send invoices electronically. chart 5 Big firms cajole smaller ones to use e-invoices. Larger companies often have standardised billing processes and hence tend to benefit more from e-invoicing. But to make it worthwhile, they must also exchange e-bills with their many smaller counterparts. Yet, large companies have much bargaining power over their suppliers to make them comply. chart 6 E-invoicing needs to overcome structural obstacles. Large companies often use already quite advanced legacy systems for billing and payment. Smaller and medium-sized enterprises are discouraged by the complexities and the lack of Author a critical mass of counterparts. Imposing a mandatory standard top-down might Thomas Meyer +49 69 910-46830 solve that but would also inflict substantial adjustment costs on firms and payment thomas-d.meyer@db.com providers. chart 7 Editor The hidden treasure of e-invoicing is a streamlined billing process. Antje Stobbe Billentis argues that an e-invoice may be EUR 18 cheaper than a paper-based bill. Technical Assistant However, the foremost part of these savings occurs in a better billing and payment Sabine Kaiser process – not by sending or receiving the bill as such. This puts many of the Deutsche Bank Research claimed benefits of e-invoicing into perspective. They won’t materialise without a Frankfurt am Main fully integrated billing process. chart 8 Germany Internet:www.dbresearch.com Are e-invoices crown or catalyst of an efficient billing process? E-mail marketing.dbr@db.com Sceptics of e-invoicing say that first the billing processes should be modernised Fax: +49 69 910-31877 because that’s where the biggest savings are. The e-invoice is just the cherry on Managing Director top. Advocates claim that once e-invoices are being introduced, they would trigger Norbert Walter this modernisation and push otherwise reluctant enterprises. Evidence across Europe suggests that e-invoicing is one of the later steps of IT sophistication, particularly among medium-sized companies. chart 9

E-Banking Snapshot 30 E-invoicing E-invoices have passed the one billion E-invoices surpassed the one billion mark mark in Europe. E-invoices describe a Electronic invoice volume in Europe, m variety of electronically sent invoices: 900 800 They range from bills simply sent by 700 e-mail to consumers to fully integrated 600 payment management systems. 500 According to Billentis, a consultancy 400 and e-invoicing advocacy, close to 300 200 900m B2B and 500m B2C invoices will 100 be sent electronically this year. back to 0 front page 2005 2006 2007 2008 2009* B2B B2C * Estimate Source: Billentis Market Report, 2009 1 The market share is tiny. The number Tiny market share of e-invoices grew by more than 40% Share of e-invoices in total invoicing volume in Europe p.a. over the last few years. Nevertheless, e-invoicing has so far only reached a tiny market share of 5% of the total billing volume. back to front E-invoices page 5% Paper-based invoices 95% Sources: Billentis, DB Research, 2009 2 More companies use e-invoices 20% of European companies send or % of enterprises in the EU-27 that used automated data exchange for sending or receiving e-invoices receive e-invoices. This is an increase 25 by 17% compared to the previous year. +17% However, Eurostat only asks whether 20 or not companies use e-invoicing, not 15 how many bills they send or receive electronically. This may distort the 10 picture. back to front page 5 0 2007 2008 >10 employees Sources: DB Research, Eurostat, 2009 3 August 2009 2

E-Banking Snapshot 30 E-invoicing No clear pattern in Europe. Estonian Who saves the trees? firms are most likely to use e-invoices % of enterprises that used automated data exchange for sending or followed by Norwegian companies. receiving e-invoices, 2008 45 More surprisingly, Italy has sneaked into the top group whereas Sweden is 40 below the EU average. In fact, typical 35 leading indicators for adoption, such as 30 GDP per capita or latitude, have no 25 explanatory power. back to front page 20 15 10 5 0 HU SI UK RO PL ES SE FR EU IE SK PT DE FI* NL IT NO EE >10 employees. *2007 Sources: DB Research, Eurostat, 2009 4 Wholesale and retail trade firms are Adoption varies by industry leading adopters in Europe. That may % of enterprises in the EU-27 which used automated data exchange for have to do with the number of sending or receiving e-invoices, 2008 transactions and bills they work with. Wholesale & retail trade But the degree of business IT sophistication is also important. For Utilities instance, more than 60% of large German carmakers, which operate Manufacturing highly advanced systems, send invoices electronically. back to front Transport & communication page Other business activities Construction 0 5 10 15 20 25 Receive Send > 10 employees Sources: DB Research, Eurostat, 2009 5 Big firms cajole smaller ones to use Big firms cajole others to use e-invoices e-invoices. Larger companies often % of enterprises in the EU-27 which used automated data exchange for have standardised billing processes sending or receiving e-invoices, by number of employees (2008) and hence tend to benefit more from 35 e-invoicing. But to make it worthwhile, 30 they must also exchange e-bills with 25 their many smaller counterparts. Yet, 20 large companies have much bargaining 15 power over their suppliers to make 10 them comply. back to front page 5 0 10 - 49 50 - 249 > 250 Send Receive Sources: DB Research, Eurostat, 2009 6 August 2009 3

E-Banking Snapshot 30 E-invoicing E-invoicing needs to overcome What drives, hinders e-invoicing? structural obstacles. Large companies Drivers Brakes often use already quite advanced Potential cost savings legacy systems for billing and payment. Critical mass of users needed Pressure from counterparts Ill-prepared billing processes Smaller and medium-sized enterprises are discouraged by the complexities Joint or open standards Differences in payment habits and and the lack of a critical mass of legal traditions counterparts. Imposing a mandatory Solutions from standard softw are Legacy systems standard top-down might solve that but packages would also inflict substantial adjustment Source: DB Research, 2009 7 costs on firms and payment providers. back to front page The hidden treasure of e-invoicing is a Biggest savings potential in streamlining billing streamlined billing process. Billentis process – not e-invoices as such argues that an e-invoice may be EUR Costs in EUR per transaction 18 cheaper than a paper-based bill. Invoice issuer However, the foremost part of these Print, Remittances savings occurs in a better billing and Payment envelop, reminders & cash Archiving payment process – not by sending or send mgmt receiving the bill as such. This puts Paper 3.90 0.50 4.50 2.20 many of the claimed benefits of e- invoicing into perspective. They won’t Electronic 0 0.40 3.00 0.80 materialise without a fully integrated Invoice recipient billing process. back to front page Payment Archi- Entering Validation Dispute Receive & cash ving Codification & matching Mgmt mgmt 1.10 3.00 4.00 2.50 4.80 2.20 0 0 1.20 2.00 2.00 08.0 Example of a company with 5,000 employees. Source: Billentis, 2009 8 Are e-invoices crown or catalyst of an Cherry on top efficient billing process? Sceptics of % of enterprises in the EU-27 which use the following, % (2008) e-invoicing say that first the billing processes should be modernised because that’s where the biggest CRM savings are. The e-invoice is just the cherry on top. Advocates claim that ERP once e-invoices are being introduced, they would trigger this modernisation Digital signature and push otherwise reluctant E-invoicing enterprises. Evidence across Europe suggests that e-invoicing is one of the 0 10 20 30 40 50 60 70 later steps of IT sophistication, particularly among medium-sized Medium-sized enterprises Large enterprises companies. back to front page Sources: DB Research, Eurostat, 2009 9 © Copyright 2009. Deutsche Bank AG, DB Research, D-60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”. The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made. In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht. In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange regulated by the Financial Services Authority for the conduct of investment business in the UK. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Limited, Tokyo Branch. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. ISSN Internet: 1619-4829 / ISSN e-mail: 1619-6465

Db research e invoicing 8-2009

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