Insights

The European Commission is seeking input from interested parties on interoperability between electronic invoice service providers. (Look here for more information on how to contribute.) This issue has implications that are much wider than the European Union. As businesses and governments increasingly adopt e-invoicing for a range of reasons, the debate will reverberate globally. Given a cursory glance, interoperability is a no brainer. But take a closer look at the business issues and it’s not so obvious. In a previous post I presented an argument for interoperability and in this second piece, I’m presenting an argument against. If you have strong views on either side of the debate, leave a comment.

The European Commission is seeking input from interested parties on interoperability between electronic invoice service providers. (Look here for more information on how to contribute.) This issue has implications that are much wider than the European Union. As businesses and governments increasingly adopt e-invoicing for a range of reasons, the debate will reverberate globally. Given a cursory glance, interoperability has distinct advanges. But take a closer look at the business issues and it’s not so obvious. Here, I want to present an argument for interoperability and in a following piece, I’ll present an argument against. If you have strong views on either side of the debate, leave a comment.

Change is often accompanied by changes in language. Not just new words to describe new things but old words change their meaning as their original meaning becomes less exact. The evolution of language is natural but like all change, some find it harder to deal with than others as they stubbornly cling to old terminology. Those who remember the sexual revolution of the 60s and 70s will certainly have heard old fuddy-duddies saying “but ‘gay’ means happy”. I used to think they were feigning confusion in an attempt at humour but no, they really were struggling to come to terms with the evolution of language as the world moved on. The mobile telephony revolution of the last twenty years has been accompanied by characteristic evolution of language. Whole new words and acronyms joined the English language as abbreviations were developed as SMS shorthand. But still, the fuddy-duddies insist on grammatically correct text messaging, refusing to embrace it or worse, trying to use it and getting it wrong. David Cameron famously thought “lol” meant “lots of love” – it’s a common mistake amongst SMS fuddy-duddies. One of the worst social media faux pas I know was the fuddy-duddy that sent the text message: “Just heard the sad news about your mother. Sorry for your loss. lol”.

The great thing about uncontrolled environments is they’re not controlled. Change becomes easy and innovation abounds. Business improvements are only limited by your ability to imagine. The sky’s the limit. Of course a business environment with no controls is a dangerous place. Mistakes go undetected and fraud can thrive unless there are pragmatic business controls in place. But working within a tightly controlled environment requires a different way of thinking in order to ensure that change isn’t stifled completely.

This week we're delighted to welcome John Mardle as a guest writer. John delivers CashPerform’s working capital optimisation programme and brings a new perspective to the supply chain finance discussion. The level of trade finance required today globally outstrips what can be achieved even by syndications that pull together all the banks. The pool is just not big enough in terms of the figures needed to support global trade. Could pension funds plug the gap?

Some companies in our industry might encourage you to “hurry up” while you’re in the procurement phase but maybe it’s because there’s something they don’t want you to stop and think about. For example, the question of business models. In what we do, you have two options. The first is pretty simple: make your money from enterprises in proportion to the value you create for their business. That means putting in a solution that makes their supply chain more efficient and accompanying it with the processes and technology that makes suppliers want to use it too. The second is a bit more old-fashioned, a bit less elegant, indeed, somewhat parasitic. This way involves using the enterprises you’re supposed to be helping as a direct sales route to their suppliers, where you’ll make most of the money. Basically turning your customer into your sales channel and pushing the majority of the financial burden down the supply chain to the guys it’s going to hurt most.

"What a tangled web we weave when first we practice to deceive" Walter Scott I am a fan of supply chain finance. Executed properly it can allow buyers to optimise their DPO without painful extensions to payment terms for suppliers and it can lower the cost of working capital to suppliers. But it doesn't always work like that. There isn't a simple definition that covers all interpretations of supply chain finance but at a high level it involves the collaboration of a strong buyer extending their superior financial strength to their buyers to allow them to borrow on the strength of approved invoices. That sounds very worthy doesn't it? But let's look at what can really happen. Let's listen in to the conversation between a buyer and supplier. The supplier is on 30 day terms and his his generous customer offers to allow him to borrow money for 30 days at a favourable rate.