E-invoicing: How digital networks are helping to eradicate decade old processes

If you have an electronic invoice system that just about meets the needs of the accounts team, but operates in complete isolation from the rest of the company, is that a system that provides much value?

It might do — if you’re doing business in the 1990s. Since then, a plethora of electronic invoicing systems have entered a crowded marketplace, all looking to streamline the complex way of processing invoices globally.

In today’s digital economy, new business value comes from linking invoice data to contracts, purchase orders, service entry sheets, and goods receipt for automated matching. Furthermore, automation of the invoice management process must extend beyond enterprise operations to include suppliers. Yet few platforms enable this. By treating accounts payable as a department, many e-invoice systems fall short of their potential.

So, how can linking electronic invoicing with a company’s other operational systems, and to suppliers, unlock this value? It turns out that an interconnected approach to invoice management in a digital age reduces costly errors, strengthens compliance, and facilitates collaboration both within the organisation and among trading partners.

A cloud-based network can assess trading partners against hundreds of criteria, including whether they can root out forced labour from their supply chain to how well they document the use of natural resources, and even giving work to minority suppliers. Of course, while software alone cannot ensure compliance with the ever-changing policies that continue to come into effect, it remains a powerful tool towards efforts in achieving it. Compliance, once a tedious task, now can be managed from a dashboard.

To reduce invoice errors effectively, a digital network must rely on intelligence — not just the human kind, but through smart invoicing rules that are essential to a business network. These rules effectively validate invoices before posting for payment to streamline processing, reduce operating costs, lower overpayment and fraud risk, and maximise opportunities for early payment discounts.

By enabling real-time collaboration between buyers and suppliers, digital networks not only bridge the information gap that can delay invoice processing, but they also reduce the complexity often associated with compliance. That includes effectively screening suppliers and monitoring business policies automatically before a transaction takes place.

However, perhaps the greatest advantage of digital networks is collaboration. Issuing an invoice, even when accurate and on-time, can sometimes be a one-way, asynchronous conversation. A buyer receives an agreed-upon product or service from a supplier, who at a later date sends out an invoice and, at an even later date, receives payment. This scenario has been the same for decades. But digital networks challenges that. The immediacy of network communications begs the question: Should electronic invoicing merely replicate the age-old process that postal mail once facilitated? Or shall it improve upon it?

We continue to see chief procurement officers choosing the latter. Through their day-to-day experience with digital networks, they have come to view invoice processing as just one part of the wider exchange of information among trading partners. An electronic invoice reflects a snapshot of the multi-party collaboration that networks enable, and — through intelligent business rules — alerts of potential errors or exceptions relating to the transaction. As we move forward in the digital age, and buyers and suppliers extend their relationship to include product design, innovation and product delivery, they are able to expand the scope of electronic invoicing to capture up-to-the-minute progress reports on the teamwork within and across organisations.

Ultimately, your electronic invoicing system shouldn’t focus only on accounts payable, it should give open visibility onto the rest of your operations and even who you do business with – so that mutual growth can be achieved and positive collaboration can flourish.

The author is Chris Rauen, Senior Manager, Solutions Marketing at SAP Ariba, the company behind the world’s largest business network, linking together buyers and suppliers from more than 3.4 million companies in 190 countries