Global Development of Electronic Invoicing


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Global tangible benefits to E-Invoicing

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Global Development of Electronic Invoicing

  1. 1. Global Development ofElectronic InvoicingKarri LehtonenVice President, APACBasware Corporation
  2. 2. Global Invoice Volumes• Global annual invoice volume is ~350 billion, mostly in paper• In industrialised countries, invoices represent ~16-30% of the total (addressed) letter volume and up to 50% in less industrialised countries• Economical cycles do not have a noticeable impact on the invoice volume• Approximately half of all invoices are in B2C sector and the other half to the B2B sector (including B2G)
  3. 3. B2B/B2G sector invoices• B2B/B2G sector is completely fragmented in terms of the invoice senders and receivers• Only a few industries receive very high invoice volumes• The organisations with the highest inbound invoice volumes are: Industries with high inbound volume Share of all invoices Retail 10% Healthcare 5-13% Public sector 9-15%
  4. 4. Electronic Invoicing
  5. 5. The definition of an E-Invoice• Strict definition of E-Invoicing: – Invoice files that are transported and archived fully electronically from end-to-end in a tax compliant manner• Not considered are: – Invoices which are transferred electronically, but violate legislation for some reason – all "semi-electronic" invoices: • Electronically sent invoices, but printed and archived by recipients as paper invoices • Scanned paper invoices • Invoices, which are transferred and processed electronically, but supported by paper summary statements
  6. 6. Motives for replacing paper invoices• Organisations start E-Invoicing projects for various reasons: – External pressure (Suppliers, Customers) – Internal cost pressure – Process innovation and automation – Quality improvement – Public sector initiatives (with the aim to reduce fraud and increase tax income and to optimize their own invoice processes) – Environmental reasons
  7. 7. Different focus areas in different regions TAX AUTHORITIES 1) ASIA & Latin America SUPPLIERS BUYERS 3) Europe 2) North America 2) North America 1) Tax Compliance, strong goverment initiatives 2) Internal efficiency driven initiatives, strong savings focus 3) Trade enablement, harmonisation of cross border rules
  8. 8. Reduction of Tax Evasion• According to various VAT breach in Argentina economic theories one of the 40 % main factors in tax evasion is 35 % the probability of being 30 % controlled/audited within 25 % reasonable time 20 %• E-Invoicing can be used as 15 % pre-requisite to secure high 10 % probability of control 5%• Further E-Invoicing can create 0% 2001 2002 2004 2005 2006 2003 2007 an electronic invoice record/archive to the tax authorities in real-time
  9. 9. Tangible Benefits of Electronic Invoicing• The Finnish State Treasury have estimated that an incoming paper invoice incurs costs amounting to €30 to €50 Euros for the receiving company• By moving to electronic invoicing these costs can be reduced to €10 Euros by semi-automating the invoice process and to €1 Euro by fully automating the process• An in-depth analysis of Politecnico di Milano states that the net benefits are €4 to € 12 Euros per invoice with VAT compliant E- Invoicing and up to €65 Euro with full integration of the trade process• With the combination of electronic and automated invoice processing, savings between 1% and 2% of the organisations entire turnover are realistic objectives
  10. 10. Public Sector Savings potential Savings Potential:• Average savings potential per invoices is around 57% for invoice senders Denmark• Average savings potential per invoices is around 62% for invoice receiver State 12%• Public sector savings potential: – Austria 600 M€ Communiti es – Italy 3,000 M€ Cities 14% 74% – Belgium 900 M€ – France 4,200 M€ – Spain 1,800 M€ – UK 4,400 M€ – Germany 6,500 M€ – ...
  11. 11. Environmental Issues• Every year 30 billion invoices are sent across Europe alone. A typical invoice is approximately three pages long meaning that 90 billion pieces of paper were printed out, posted and flown across Europe in just one year• If all of those invoices were sent electronically 12.6 million trees, 105 billion pieces of A4 paper, 13 billion litres of water and 5.4 billion kWh of power could be saved each year on just the paper manufacturing alone• The equivalent of which could power 15.8 million 40W lamps, constantly, for 24 hours of the day for an entire year
  12. 12. The carbon footprint of different types of invoices• In addition to the actual manufacturing of the paper, the delivery, archiving and processing of E-invoices result in significantly smaller CO2 emissions than paper invoices• The carbon footprint of an E-Invoice is only one third of a paper invoice• The new Carbon Tax on the Australian invoices will be approximately $24 Million AUD per annum
  13. 13. E-Invoicing service providers
  14. 14. E-Invoicing operator situation• By 2012, more than 550 e-Invoicing operators were active in the European market alone• These “operators” are either start-up companies in the e-Invoicing field or other types of business expanding to the e-Invoicing market (e.g. banks, post, EDI vendors, print shops etc.)• Banks tend to concentrate on B2C and SME invoicing• Other non-bank operators have approximately 85% market share in all electronic invoices
  15. 15. Standards• Lack of information about existing standards combined with some inflexible organisations has resulted in the re-invention of dozens of niche standards (domestic or industry focus)• There are about 10,000 different ERP solutions in Europe alone, all have different integration points• That is why most e-lnvoicing operators offer any-to-any-data-formatting services• As a result, senders and recipients of invoices using such services are independent of any standards and they no longer need to wait for a market dominant standard
  16. 16. The global E-Invoicing landscape
  17. 17. Different E-Invoice Streams and Sectors• The USA is leading the market for E- invoices to consumers (B2C)• The market leaders in the Business-to- Business (B2B) and Business-to- Government (B2G) segment are located in Europe and Latin America• This year (2011), roughly 5 million European businesses and 75 million consumers are expected to send or receive electronic invoices. They likely exchange more than 3 billion E-Invoices.
  18. 18. Classic market development pattern in most countries 4. Mass market Adoption 3. B2B Large organizations 2. B2C Consolidator 1. B2C Biller Direct0 Time in Years 10
  19. 19. Global E-Invoicing Market 2012 B2B, B2G, G2B and B2CSource: Billentis 2012
  20. 20. Europe• The expected market penetration of E-Invoices will be above 50% in 2017 for the B2B/B2G segment• This should be achievable without any intervention from politics and economical development• B2C invoices – About 20% of European households receive electronic invoices – Roughly every second consumer in Nordic countries prefers to receive electronic invoices via internet on-line banking – In other countries, most consumers prefer to receive electronic invoices via email
  21. 21. Invoices received by enterprises Poland Lithuania Czech Rep Austria Germany Russia Latvia Fully Electronic Sweden Email Hungary Scanned paper Romania Paper Estonia Norway Denmark UK Finland 0% 20% 40% 60% 80% 100%In 2011 the market grew by more than 35%. Sustainable annual growth rates of more than30% are also expected for the coming years in the B2B and B2C segments
  22. 22. EU Wide Focus on E-invoicing• The European Commission is focusing its efforts on removing barriers to the broad-scale adoption of electronic invoicing in Europe• Four key priorities on this topic are: – Ensuring a consistent legal environment for E-Invoicing – Achieving mass market adoption by getting SMEs onboard – Stimulating an environment that creates maximum reach between trading partners exchanging invoices – Promoting a common E- Invoicing standard• EU Commission has set a target for E-Invoicing to be the norm of invoicing by 2020• New directive 2011/7/EU [22], focusing on timely payments to SMEs
  23. 23. North America• Approximately 5.1 billion E-invoices were delivered in 2010 in the US and E-Invoices are likely to overtake paper in 2016• In the B2C segment the US is 3-4 years ahead of Europe• On the other hand the Northern American B2B/B2G market seems to be 2-3 years behind Europe and some Latin American countries• The annual E-Invoicing growth rates of about 25% are increasing, but are still almost 10% below European rates
  24. 24. US Federal Initiative (July 2011)
  25. 25. Latin America• In contrast to the rest or the world, most Latin American countries have gone straight ahead to phase 3 (e.g. Chile) and phase 4 (Brazil). Argentina and Mexico are other advanced markets in Latin America• The initiator for the market activities in most cases is the government• Although the legal requirements are among the strictest worldwide, some countries in Latin America seem to take over the global leadership role• The Latin American model is also inspiring larger countries in Asia
  26. 26. ASIA Pacific market• Most countries are in evolution phase 1 and 2: Large bill issuers stand with "Bill presentment" via their company portals or internet banking• Market leaders are Singapore, Hong Kong, Taiwan and South Korea• Singapore is the only country with a active government initiative, E-Invoicing has been mandatory when doing business with the government since 2005
  27. 27. Market Evolution
  28. 28. Public Sector’s key role in development• The public sector is in an excellent position to initiate the breakthrough in the mass market – In many countries, 2/3 of local enterprises are suppliers to the public sector – Public sector bodies have the power to push these suppliers to send invoices electronically – Federal government is also in the position to modify the legislation in a user- friendly way if necessary
  29. 29. Current Market Trends• Fees for paper invoices – Paper invoicing surcharges are becoming more and more popular in some countries (EUR €1 - €3.50 to consumers and EUR €5 - €25 for businesses)• More innovative rollout models: – "Opt-Out" rollouts – Online Banking; when customers type in payment data, they receive a pop-up message inviting them to receive the invoices electronically (customers can activate this enhanced service with a simple mouse- click)
  30. 30. Break Through to Mass Market• Initiatives which did NOT achieve a broad break-through – Classical Opt-In models practiced for on-boarding of suppliers – Low-cost or free services – Standards – Removal of legal barriers• The key criteria for a substantial breakthrough are – Obligations for trading partners to support E-Invoicing – Excellence in the on-boarding process; “carrot and stick”- policy; make registration process and usage of E-Invoicing services as easy and quick as possible – Appropriate service offered to all sizes of trading partners including any-to-any data formatting and e-archiving
  31. 31. Governments that have banned paper invoices – Denmark, from 1/2/2005 – Singapore, from 1/5/2008 – Sweden, from 1/7/2008 – Italy, from 1/7/2008 – Finland, from 1/1/2010 – Brazil, from 1/4/2012 – Kazakhstan from 1/1/2012 – Greece, from 1/9/2012 – USA, from 1/1/2013 – Norway, from 1/7/2013 – Nepal, Mexico, Netherlands, …
  32. 32. How about Australia?
  33. 33. Thank