Companies of all sizes have adopted accounts payable (AP) automation solutions, yet recent IAPP-TAWPI and Glenbrook research reveals that e-invoicing benefits remain elusive.
Electronic invoicing, or e-invoicing, means different things to different people, and much depends on the context. There are solutions that cater to accounts receivable, focused on enabling efficient creation and delivery of electronic invoices. These tools enable suppliers to reduce their billing costs by eliminating print and postage while simultaneously meeting the demand of buyers for electronic invoices, through a variety of delivery mechanisms including EDI, PDF via email, PDF via web portal, etc..
However, and somewhat counter-intuitively, most of the industry does not mean electronic invoice creation when they use the terms e-invoicing or EIPP. What they mean is electronic invoice receipt – solutions for buyers, not suppliers. These accounts payable solutions are designed to image incoming paper invoices, extract invoice data through optical character recognition, automatically match invoices to purchase orders, provide efficient workflows to route invoices to employees for approval, and, finally, to schedule payments.
Sophisticated buyers – large and small companies alike – recognize the benefits of streamlining accounts payable (AP) processes. Eliminating paper invoice processing can speed up approval, prevent manual key entry errors, facilitate accurate accounting entries, and often has the added benefit of ensuring that the same process is adhered to from region to region and department to department. Electronic payment further increases efficiency and decreases payment costs.
Yet for many companies, even early adopters, the e-invoicing benefits realized thus far have been modest. The IAPP-TAWPI survey results presented in Glenbrook’s new research report indicate that invoicing and business payments remain stubbornly paper-centric. There are a number of contributing factors, including limited budget for back office automation, IT complexity, and last but not least, supplier reluctance to submit invoices electronically.
Paper Still Dominates
Despite broad adoption of e-invoicing solutions, paper invoices dominate most AP departments. Only 26% of the companies surveyed fully automated their invoice receipt and approval process, with data captured and loaded into the system of record without manual intervention. Over half (58%) of the companies surveyed continue to manually capture invoice data and have a manual review process. The vast majority of business (of all sizes) report that less than 20% of incoming invoices are eInvoices.
It takes years for an e-invoicing program to gain traction. The majority of survey respondents are relatively new to e-invoicing – more than half started programs in the past twelve months. Of those respondents that started an e-invoicing program in the last year, only 2% report that more than 40% of the invoices received are received electronically. The percentage climbs over time, with 17% of respondents that started a program 3-5 years ago receiving more than 40% electronically, and 26% of those with 6-9 years of experience receiving more than 40% of invoices electronically. Very few of the survey respondents report e-invoicing rates above 60%.
Most companies report that they experience faster transactions and improved processes as a result of eInvoicing – although results are directly proportional to the number of eInvoices received. And manual processing still remains very common, even among those companies that have mature e-invoicing programs. The next most common benefits associated with eInvoicing are greater accuracy (by avoiding manual entry) and improved auditing and compliance.
A striking number of respondents indicated that they had not received any cash flow management benefit at all as a result of e-invoicing. Given that the ability to capture early pay discounts if often a big selling point of AP automation, it was also surprising how few companies reported that they were able to capture more discounts as a result of their e-invoicing program.
Additional Research Topics
The research brief explores e-invoicing motivations and benefits by size of company, industry, and duration of e-invoicing programs. E-invoicing obstacles and methods to increase the level of e-invoicing participation are also covered. The report concludes with Glenbrook’s perspective on e-invoicing and implications for both technology providers and their accounts payable customers.
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E-Invoicing: The Buyer AP Perspective
A research brief from Glenbrook Partners, in conjunction with IAPP-TAWPI, sponsored by Basware.
Accounts Payable, a Buyer’s Perspective
The AP Department Today
Multiple Flavors of E-Invoicing
The State of E-Invoicing: As of 2010
Invoice Automation Varies Considerably
Maturity of E-Invoicing Programs
Importance of E-Invoicing Programs
Rationale for E-Invoicing
AP Eager to Increase Level of E-Invoicing
Unclear How to Increase E-Invoicing
Collaborating with Suppliers
Key Considerations for Buyers/Accounts Payable
Key Considerations for AP Solution Providers
Upcoming Research from TAWPI & Glenbrook Partners
About the Authors
List of Figures
Figure 1: Businesses Face a Long Tail of Suppliers
Figure 2: AP Department Size
Figure 3: Typical AP Process Flow
Figure 4: AP Automation Solutions
Figure 5: E-Invoicing Motivations
Figure 6: Level of Automation
Figure 7: Invoices Processed Annually, by Size of Company
Figure 8: Percentage of Invoices Received that are E-Invoices
Figure 9: E-Invoice Receipt Method, by Size of Company
Figure 10: Maturity of E-Invoicing Programs
Figure 11: Importance of E-Invoicing by Size of Company
Figure 12: Rationale for E-Invoicing
Figure 13: E-Invoicing Benefits Achieved
Figure 14: Benefits by Length of E-Invoicing Program
Figure 15: Benefits by Industry
Figure 16: Plans to Increase E-Invoice Volume
Figure 17: Most Effective Methods to Increase E-Invoicing
Figure 18: Obstacles
Figure 19: Supplier Reaction
Figure 20: AP Plans for Technology Projects
Accounts payable is leading the way, as it is often far easier to automate than accounts receivable. We’ll address accounts receivable e-invoicing opportunities – the supplier perspective – in a subsequent report, to be published in early 2011. If you’d like to be alerted when it is available, send an email to me.