17 Dec Confirmation Bias and Business Cases
Recently I had the pleasure of being with both Pete Loughlin and Peter Smith of Spend Matters Europe at an eInvoicing roundtable event in London on 9 December. The event was both enjoyable and frustrating.
Before I share some reflections on the event and to avoid any doubt, I say immediately that I support the use of eInvoices – but I am also sceptical about the way in which the debate is being framed.
One of the oft-repeated assertions during the roundtable was that the business case for e-invoicing as an activity in its own right is “overwhelming”. One commenter from the floor said at least twice that the government is “sitting on” several £billion in benefits which, I presume we were to infer, would be available if only the UK Government would adopt eInvoicing.
I do not believe this to be the case, at least in the terms it was presented.
There are three distinct reasons why I do not believe it. The first is that this type of statement fails to distinguish between efficiency gains from process and actual bottom line savings. There is clearly a case to be made for the former but the case for the latter is not made, or at least not to that scale.
The second reason is because the unspoken assumption in the calculations is that there are purchase orders to match against. This must not be assumed. In far too many public bodies the response when an invoice is received in any form is to have to hunt for the purchase order (often discovering that there wasn’t one because the requisitioner had ordered on the phone) and also look for the reciept of the goods or service. The accounts payable team is left to work out who placed the order, with whose approval and by what authority, from which budget and under which commodity code, at what price or on what terms and conditions etc. etc. In this case the fact that the invoice has been received by electronic means is of no significant benefit at all and certainly does not unlock several £billions of efficiency gain. Shuffling sunk costs around between budget heads is not a saving, it is smoke and mirrors. This is why earlier attempts at efficiency programmes were forced to distinguish between ‘cashable’ and ‘non-cashable’ savings.
The third reason is that I detect an overdose of confirmation bias in the discussions. Confirmation bias is a shorthand way of saying that people see what they want to see and, crucially, exclude what they don’t want to see. This is partly why inconvenient truths about invoices being part of a process are minimised (the other reason is that those pushing the case for eInvoices have generally never been responsible for accounts payable). It is no doubt coincidental that the strongest advocates for eInvoice as a stand-alone activity are the companies which offer stand-alone solutions. This mind-set does the case for eInvoicing no good at all.
Ian Burdon can be found on twitter @IanBurdon