A fistful of e-invoices

A fistful of e-invoices

Posted by Ian Burdon in AP Automation, e-invoicing, Electronic Invoicing 10 Jan 2013

The debate on e-invoicing here and elsewhere has been interesting, entertaining and informative but not, I think, without problems. Those problems have been swept discretely under the carpet.

Let us go back to basics.

Purchasing Insight logoAn invoice is a demand for payment. In the normal case one expects an invoice to match, in whole or part, a purchase order.  It really does not matter much what format the invoice is in if there is no preceding purchase order to match against unless you are in the habit of paying invoices unchecked. If the first you know of a transaction is when an invoice appears in the accounts payable department and you can not validate the order then you have a much, much bigger problem to address.

This is a classic “systems thinking” issue in which components in a process are considered individually outside of their whole context. Mandating e-invoicing merely legislates for one part of a process without considering the function of that part within the whole.

The equation of e-invoicing and e-procurement is empty marketing rhetoric. As I have argued here before the trick is to remove the “e” prefix and see if the statements still make sense. Is procurement delivered by mandating invoices? No. Specifically, in terms of P2P an invoice, “e” or otherwise, is simply a demand for payment: it does not of itself either evidence a valid purchase or the terms and conditions of such a purchase. The fundamental component of “three-way-matching” (and for that matter two-way matching) is “matching”.

This is fortified if one wants to automate also the settlement process, in which case one needs a solution which matches an electronic invoice with an electronic purchase order record, populates the ledger accurately, including for items such as carriage and VAT, and triggers payment.

Unless there is proper purchase order coverage then mandating e-invoices benefits no-one at all except the companies which provide e-invoice solutions.

If you want to derive the full benefit of e-invoicing then you need implement a solution which covers the whole process, including behavioral change, and to engage with a provider which understands the whole process and has a track-record of delivering the whole solution (disclaimer: I work for one of them).

Ian Burdon can be found on twitter @IanBurdon

  • Markus Hornburg January 14, 2013 at 12:10 pm /

    Ian,
    I completely agree with you. There is a fundamental requirement to change the overall P2P process. There are still too many invoices without purchase orders backing them up but reality probably shows that there will never be 100% invoices backed by purchase orders.
    I also agree that we should not stress the “e” too much because essentially we are talking about a historic process that now happens to be available in electronic format. As such, the law requires every company to raise an invoice for taxable goods or services provided.
    To remain on paper while all technology is present is somewhat ridiculous. If Governments mandate the use of electronic invoices instead of paper invoices, they are forcing the change.

    But of course from a business perspective there is a huge outstanding requirement to change the paper processes from within.

    Let´s see what will happen.
    Markus

  • Ian Burdon January 25, 2013 at 3:58 pm /

    Markus

    Apologies, just catching up with comments. Thanks for this. As you say we’ll see what happens. I hope to get a bit more written on similar subjects shortly.

    Ian

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