The stage is set for einvoicing to revolutionise global business

Given the profound benefits of e-Invoicing, it is remarkable that only a little over 8% of global invoices in 2014 will be processed electronically, according to Billentis’ 2014 E-Invoicing / E-Billing report.

Considering that e-Invoicing can deliver 60% savings compared to traditional paper-based processing, with a payback period of around one year - governments, buyers, suppliers and service providers should be encouraging the practice to improve efficiency, reduce administrative expenses and reap the benefits of on-time payment within their supply chains.

The public sector, which accounts for more than 10% of the total global invoice volume (paper and electronic), has a vital role to play in driving e-Invoicing. Effective e-Invoicing enables large receiving organisations and their accounts payable teams to process 125,000-plus e-Invoices per year and per staff member – roughly 10 times more than paper-based invoices – so the incentive to switch is considerable. With governments across the globe under intense pressure to reduce costs and improve value for money for the taxpayer, e-Invoicing is something of a no-brainer. Indeed, we have already seen forward-thinking administrations, such as Denmark and Finland, mandate electronic invoice for B2G transactions. Italy will join this group as it plans to introduce B2G e-Invoicing in June. By means of a new Directive, all public administrations in EU will be required to provide an e-invoicing channel to their suppliers based on a core invoice standard. Other countries, such as Brazil and Mexico, have taken this a step further and have mandated e-Invoicing for all transactions in their markets.

The UK government has recently taken some positive strides as well. In April, supported by thought leadership from Tungsten Corporation, the results from the UK Parliamentary Inquiry into the Slow Adoption of e-Invoicing in the Public Sector recognised that implementation of the technology could save the public sector and its suppliers a minimum of £2bn per annum. Others suggest that the value of savings realised could be as high as £4bn - £6bn. The recommendations set out in the report – which include setting benchmarks for governmental e-Invoicing and making it a contractual requirement in the public sector – represent both marked progress and a sound framework within which to move forward.

The success of early public sector adopters, most prominently those in Latin America, should provide further assurance to the UK government that e-Invoicing is a positive step for the economy. Since the launch of its mandatory ‘Nota Fiscal Eletrônica’ e-Invoicing programme in 2006, the Brazilian government has reduced the proportion of its GDP that is constituted by the ‘underground economy’ – or black market – by 25%, owing to improved visibility of money flows. Similarly, having enacted compulsory e-Invoicing in 2011, the Mexican government has put a major thorn in the side of tax-dodgers, against which it has battled for decades and cost it an estimated $3.4bn between 2007 and 2009.

The UK Parliamentary report also noted that e-Invoicing improves liquidity to SMEs – a category that incorporates 99.8% of European businesses – by enabling prompt and predictable payment. This acceleration of the supply chain finance machine directly stimulates economic growth through improved working capital, and is particularly important as SMEs have for a number of years battled against reduced lending from traditional channels. According to the Bank of England’s latest Trends in Lending report, the stock of lending to SMEs fell across a range of measures in 2013 for the fourth consecutive year.

An additional benefit of e-Invoicing, owing to its centralisation and transparency, is the ability to build in other, complementary services that super-charge the supply chain. For example, service providers can offer spend analytics tools that enable Procurement and Finance teams to identify price variances for the same product or service from the same supplier across their organisations. Alternatively, the integration of an invoice discounting platform can allow customers to access early payment options on their e-Invoices.

At this moment, following the successful acquisition of FIBI Bank (UK) at the end of May, Tungsten Network Finance is rolling out supply chain finance across its network. Suppliers will have the option, at the click of a button, to receive early payment on approved invoices, generating improved working capital, and reducing the time spent chasing late payers.

With landmark alternative sources of finance legislation expected to be outlined in the Queen’s Speech next week, and the European Central Bank even mooting the securitisation of SME loans to stimulate lending, it is clear how important this innovation is.

Pleasingly, more and more governments and businesses are becoming aware of the huge benefits of e-Invoicing. With 500 billion invoices processed annually across the globe, and savings estimated at around €11 per invoice for buyers and €6 for suppliers, it’s not hard to see why.

And as customer-centric providers improve their offerings with integrated e-Invoicing and supply chain financing, there exists the opportunity to revolutionise the way that global businesses within all sectors transact, bringing more efficient and stronger SMEs, corporates and economies at large. The stage is set.

Charles Bryant is the European Affairs Adviser at Tungsten Corporation PLC