April 2011 e-Invoicing: A Global View Research Report April 2011
A Basware Reporte-Invoicing: A Global View02/03Contents3 Executive summary5 Why do companies need e-invoicing?6 What automation currently exists?7 What are the challenges in automation?8 Why does supplier connectivity matter?9 Conclusion10 Recommendations
Executive summaryThe 2011 Basware e-Invoicing: A Global View research report provides www.basware.coma snapshot of the trends shaping the improvement of financial systemsand processes for businesses across the world. Whilst businessesseek to create greater cost efficiencies in 2011, the reality for mostorganizations is that realizing this strategic goal is very challenging. 61%Businesses in the study are faced with interoperabilitychallenges, supplier enablement issues and the removal ofpaper and manual processes from payment systems strugglingto meet corporate expectations. Think interoperability presents e-invoicing challenges for suppliers or customersIn the pursuit of high level efficiencies in payment processes, 42%companies large and small seek immediate benefits frominvestments made to improve existing infrastructure. However,the common experience of businesses aspiring to realizeautomation goals is a staggered process where supplier Send paper purchase orders to suppliersenablement, compliance and changes to legacy processesabsorb significant time and energy. Ultimately, this impactsthe bottom line.It is encouraging that respondents in the survey identify 78% Would send e-orders ifwith the value of automation in improving payment suppliers could receive themprocesses. However, automation ranges from leading-edgeimplementations of solutions to remove all aspects of manualprocesses to a simple transitioning from paper to PDF formatsfor exchanging PO and invoice information between suppliers.The report describes a desire for change that is shadowed by 51% Believe open networks leadan operational reality that is failing to meet expectation. to reduced supplier costs Efficiency Gaps 72% Improving operational efficiency is a strategic priority for 2011. 93% Believe invoice processing can be somewhat or significantly (34%) improved. Supplier Issues 53% Think greater supplier awareness of the benefits will move e-invoicing forward. Top rated responses 46% See supplier reluctance/cost to supplier as a barrier to e-invoicing adoption.
A Basware Report e-Invoicing: A Global View 04/05 Executive summarywww.basware.com The key findings of the e-Invoicing: A Global View • 61% of respondents believe that [supplier] research report can be summarized as follows: interoperability presents e-invoicing challenges for suppliers or customers Commercial Drivers • Suppler reluctance towards additional costs (46%) was • 72% of respondents cite ‘improving operational the most common barrier to e-invoicing, with lack of efficiency’ as a key financial priority for 2011 supplier activation capabilities rated second • 93% of respondents believe that invoice processing can be somewhat or significantly improved Open Networks • 50% of respondents believe that e-invoicing can help • 51% of respondents believe that an open network (to significantly to achieve operational efficiency objectives improve interoperability) would reduce supplier costs for e-invoicing Efficiency Gaps • 66% of respondents associated open supplier networks • 64% of respondents claim to suffer time loss as a result with flexibility, whilst 61% felt they offered increased of manual processes related to payment processing efficiency • Only 9% of respondents describe high levels of e-invoicing activity (80%+ invoices managed The concept of e-invoicing appears to be well established electronically) across the commercial landscape. However, this manifests • 41% of respondents do not send out electronic invoices in many cases as a reliance on PDF-based payment at all, and 18% do not receive them processes and significant amounts of paper and manual • On average, 1 in 4 invoices (26%) are not captured in resources to create a base-line level of automation. systems where invoice scanning is in place Furthermore, taking manual processes into an automated framework that relies heavily on compliance from Supplier efficiency a supplier base is a journey with many milestones. • 35% of respondents would definitely send e-orders if Companies are not automating all payment processes all suppliers were able to receive them – a further 43% of the time – even if that is the desired outcome. would ‘probably’ do so Research Methodology Basware conducted an online survey of 1,373 professionals in relevant roles during February 2011. Surveys were globally distributed in local languages, with 88 responding to the US survey, 288 responding in Western Europe, 74 in Australia, 451 in Scandinavia, and 30 elsewhere.
Why do companies need e-invoicing?Finance efficiency is the ‘holy grail’ of AP and purchasing professionals, www.basware.combut it is a very difficult goal to achieve, even though the potential forimprovement is readily apparent.72% of respondents see improving operational efficiency can be somewhat or significantly improved in theiras a key financial priority in the coming year, as shown businesses. Many of these businesses feel they can usein Figure 1. Existing automation appears to have done e-invoicing to meet their key efficiency goals. 50% say thatlittle to keep improving operational efficiency from being e-invoicing can help them improve operational efficiencya continuing priority. Other measures of efficiency are “to a great extent”, and 47% say that it can create somealso important strategic issues for many companies, improvement, as shown in Figure 2. 19% expect greatwith 48% citing optimising cash flow and working capital improvement in optimising cashflow and working capitalmanagement, 43% seeking to reduce overall purchasing management, and another 74% expect some improvement.costs, and 35% hoping to improve forecasting and planning 15% expect significant reductions in purchasing costs toability. This efficiency focus stands out particularly strongly come from better e-invoicing, while 70% expect someagainst the 45% who list increasing profits as a priority. improvement.Clearly, the need to improve existing processes is relatedto the bottom line. Longer-term change, leading to longer- It seems that business efficiency, and long term businessterm benefit, is a focus for many businesses. sustainability and profits are very much on business leaders’ minds. Process and technology improvements areFinancial automation is a tool for achieving this long-term tools to achieve these goals.gain. 93% of respondents believe that invoice processingFIGURE 1: What do you consider to be the key financial FIGURE 2: To what extent do you think e-invoicing excellencepriorities for your organization for the year ahead? can help achieve the following financial objectives?Improving operational Improving operational 50% 72%efficiency efficiency 47%Optimising cash flow and Improving environmental 35% 48%working capital management practices (e.g. green sourcing) 62%Increasing profits and top Improving auditing/ 24% 45%line performance compliance 67%Reducing overall purchasing Improving relationships 23% 43%costs with suppliers/customers 69%Improving forecasting/ Optimizing cash flow and 19% 35%planning ability working capital management 74%Improving relationships Reducing overall 15% 34%with suppliers/customers purchasing costs 70%Improving environmental Improving forecasting/ 13%practices (e.g. green sourcing) 27% planning ability 71%Improving auditing/ Increasing profits and top 11% 22%compliance line performance 75%Better managing currency Better managing currency 4% 6%volatility volatility 65% 0% 20% 40% 60% 80% 0% 20% 40% 60% 80% Great extent Some extent
A Basware Report e-Invoicing: A Global View 06/07 What automation currently exists? Efficiency Gapswww.basware.com Businesses’ focus on process improvement is well-placed. There is clearly room for improvement in many businesses’ current operational practices, and lack of current automation is resulting in loss of time and profits. 64% of the respondents say that they lose time because On average, 1 in 4 invoices are not scanned into an of manual processes related to payment processing. The automated processing system. These are likely dealt need to move invoices, POs and other information around with via entirely manual, paper-based systems. 76% of the business in paper form or to manually enter data into businesses have some sort of scanning in place, as shown systems is costing resources, and ultimately profits. in Figure 4, with roughly one-third of those using an outsourced scanning service. Few businesses escape this problem entirely. Only 9% describe high levels of e-invoicing activity where at Efficient invoice processing is one of the keys to the least four in every five invoices (or 80%+) is received greater operational efficiency, but not all businesses electronically, as shown in Figure 3. 56% say that they are taking full advantage of the tools, and the levels of have less than 20% received electronically – fewer than operational excellence, available to them. one in five. Most striking is the fact that 41% do not send electronic invoices at all and 18% do not receive them, almost certainly resulting in time and resource loss. FIGURE 3: What proportion of all the invoices your company FIGURE 4: Do you use any invoice scanning services? sends out in a typical month is fully electronic? (I.e. legally recognizable invoice data files that can be passed directly to the customer’s computer system, without being manually keyed in) 2 17% 22% 3% 6% 3% 56% 53% 6% 23% 11% Less than 20%: 56% 81%-99%: 6% Yes, in house 53% No 22% 21%-40%: 11% 100% / All: 3% Yes, outsourced 23% Don’t know 2% 41%-60%: 6% Don’t know: 17% 61%-80%: 3%
What are the challenges in automation?Supplier efficiency www.basware.comBusinesses understand the possibilities that invoice automation represents (only14% of respondents say they are not clear about the potential benefits), but manyare struggling to realize these benefits. Cooperation between companies and theirsuppliers is a key element of finance automation, and one which often proves to be achallenge. The success or failure of an e-invoicing initiative often depends on gettingthe suppliers on board and convincing them of the associated benefits.Perceived costs to suppliers and suppliers’ reluctance FIGURE 5: Which of the following do you see as challenges/to participate in automated systems are cited as the key barriers to increasing e-invoicing in your company?barrier to e-invoicing by 46% of respondents, with 36%considering lack of supplier activation capabilities to bea challenge. These two factors work in tandem – supplierreluctance being understandable in the absence of Cost to supplier/supplier 46% reluctancesystems that make it easy for them to participate. Lack of supplier onboarding 36% capabilities35% of respondents would definitely send e-orders if Customer reluctance to 32%suppliers were able to receive them – a further 43% receive invoices electronicallywould ‘probably’ do so. The current situation doesn’t Limited budgets/insufficient 31% fundingreflect this desire to work with suppliers. Currently, 67% Concerns about 27%of respondents send at least some of their purchase implementation processorders to suppliers via email attachments, 44% use Complex invoicing processes 26%faxes, and 42% use paper purchase orders, as shown Insufficient businessin Figure 6. A remarkable 34% deliver at least some system capabilities 23%purchase orders by phone – a process which presumably Consumer customers not 19%creates record-keeping and consistency challenges. able to receive e-invoices Lack of management/Board 16% level supportCurrent non-automated systems, whether email, paper, Not clear on benefits 14%or phone, serve short-term business purposes, and of e-invoicingallow for purchase orders to be transmitted. They do No barriers/challenges 8%not provide for the level of operational efficiency and Reluctance fromsupplier/buyer cooperation that businesses aim for. By procurement/finance dept 7%adopting greater levels of automation, businesses canpave the way for long-term, sustainable gains to thebottom line. FIGURE 6: How do you currently send purchase orders to your suppliers? Email (PDF attachment) 67% Fax 44% Paper 42% Phone 34% XML order through service 17% provider XML order NOT through 11% service provider
A Basware Report e-Invoicing: A Global View 08/09 Why does supplier connectivity matter? Open Networkswww.basware.com Connections between companies and their suppliers are central to the efficiency that businesses hope to achieve through automation. Open networks – which allow suppliers and companies to work together in fully interoperable systems – are an important tool to help both groups achieve their goals. A lack of these types of open systems is creating systems will allow. 61% see efficiency and cost savings problems in more than half of businesses – 26% as a benefit – interoperability would save them money considering these challenges to be significant, as directly. Common standards and efficiency is cited by shown in Figure 7. Indeed, only 5% say that a lack of 54%, and 51% think open e-invoicing networks would interoperability presents no challenges at all. reduce costs to their suppliers. Considering the supplier barriers many highlighted to increased e-invoicing, Respondents readily recognize the benefits of improved consistency and benefit to suppliers are major interoperability, as shown in Figure 8. 66% associate arguments in favour of open networks, which can help open networks with increased flexibility, the ability to businesses remove the barriers and realize the benefits change and adapt more quickly than closed e-invoicing of automation. FIGURE 7: To what extent does the lack of interoperability FIGURE 8: What benefits do you think and open network between e-invoicing solutions present challenges for your offers over more traditional closed e-invoicing networks? suppliers/customers? Increased flexibility 66% Increased efficiency/ 26% 61% cost savings Common standards/ 34% 54% consistency Reduces costs to 51% our suppliers Suppliers/customers Reduced complexity 46% Environmental benefits 39% 5% Better supplier 29% relationships 35% Don’t know 10% 0% 20% 40% 60% 80% Major challenges 26% Not an issue 5% Some challenges 35% Don’t know 34%
ConclusionThe challenges that prevent greater levels of adoption and utilization may www.basware.combe significant, but they are consistent across the market. Different softwaresolutions will meet varying industry needs, timescales and budgets. However,the business drivers for undertaking such projects are quite similar.In a commercial world of increasingly sophisticated processes difficult or costly will resist change. Financeoperational interdependencies and automated professionals who cannot evidence a benefit in theprocesses, the enduring reliance on paper transactions administration of new processes will struggle withis remarkable. The entire financial system has effectively transition. Executives who fail to identify the returnweaned itself away from cash, with cheques also on investment in programmes to automate paymentbecoming more infrequent over time. However, invoice systems, or to yield value from improved transactionaland PO-based transactions seem addicted to what is fast visibility and accountability will seek those benefits inbecoming an outdated form of financial exchange. other areas.Large businesses and their financial partners are In summary, whilst the software to deliver automationacknowledging this imbalance and asserting more clearly is available and the appetite to enable it is keen, this isthe need to deliver change, tackling the issues that only part of the story. Success resides in the recognitionprevent a more dynamic basis of payment processing. of the need for interoperability with external parties, the continued pursuit of process improvement as anThe requirement for any transition is that it benefits all ongoing goal and the realization of the invoice processparties. This is why enabling suppliers to start transacting as a keystone to creating efficiencies across the entireelectronically becomes critical to the equation of purchase-to-pay framework.e-invoicing success. A transaction is a dialogue andrequires that all aspects of the exchange can findsynergies in process. Suppliers who find e-invoicingExecutives who fail to identify the return on investmentin programs to automate payment systems, or toyield value from improved transactional visibility andaccountability will seek those benefits in other areas.
A Basware Report e-Invoicing: A Global View 10/11 Recommendationswww.basware.com Define a clear automation roadmap Untangle the supplier network Whilst the process of automating any system may rely on Creating a process where suppliers can easily reflect and software and consultancy, the roadmap for automation accommodate changes in the way you do business is a is critical. An organization must recognize what levels of high priority. Investing time in engaging key suppliers change are required to meet a commercial need. No two and taking a partnership approach to e-invoicing can pay businesses will have identical plans, goals and operational dividends in the longer term. There is also the need to footprints. Therefore, a roadmap of what needs to evolve recognize that the supplier base cannot change processes in the business will make transition easier to manage and overnight and a timeline of adoption should be used to set also more flexible. project expectations. Less than everything at once Efficiency in quality Businesses’ automation needs to happen in stages, Set quality standards for the implementation and results achieving part of the overall goal at each step. The stages, of any e-invoicing activity. The selection of vendors and however, should be understood before you start. Typically, deployment partners should be defined by payment key regions, or departments will start the process of system needs and supplier complexity. Whilst ERP invoice automation whilst the company absorbs the defines the direction of large systems for your business, effects of systemic change and adapts accordingly. e-invoicing is not about the shortest route to a PDF. Achieving real automation requires detailed discipline and processes specific to your business that need specific solutions and support. Investing time in engaging key suppliers and taking a partnership approach to e-invoicing can pay dividends in the longer term.
Achieving real automation requiresdetailed discipline and processes specificto your business that need specificsolutions and support.