A fistful of e-invoices

A fistful of e-invoices

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

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