27 Mar 2011 e-invoicing – one size doesn’t fit all
When the electronic invoice vendors tell you they can get you to anywhere near 100% electronic invoicing, don’t believe them. And don’t believe the scanning guys either. The truth is, they’re both right – but only if they work together.
The theory goes that 80% of your invoices are from 20% of your suppliers. You only need to get the biggest 20% of your suppliers on board and you can achieve 80% of your wildest dreams. That feels like you can achieve 80% of the results for 20% of the effort. It isn’t that easy though. It’s true that the Pareto rule does mean that you can achieve great results by concentrating on the right areas, the priority suppliers, but regrettably for lots of businesses, the 80:20 rule just doesn’t apply.
Many organisations have an extreme supplier tail. This can be for a variety or reasons but if you have a huge proportion of invoices from a very small group of suppliers but the majority of invoices are from a large number of relatively small suppliers, your supplier adoption challenge can be massive if you intend to use electronic invoicing. A similar problem exists if there is a very wide geographical diversity. Numerous diverse tax and legal requirements can make the implementation of e-invoicing an uphill challenge.
But it doesn’t have to be all bad news. Sure there’s challenges but the answer is to recognise that one size doesn’t fit all. You can get close to 100% electronic invoicing if you adopt a hybrid approach.
e-invoicing – the hybrid model
We can debate till we’re blue in the face whether scanning invoices or accepting pdf images is really e-invoicing. It’s irrelevant. AP automation is what we’re trying to achieve. Whether we do that by using a predefined invoice message standard or we achieve it by extracting the data from a paper invoice is immaterial.
The good news is that we don’t need to choose one approach or the other. Indeed, the hybrid approach could be the one that gets the close to 100% electronic invoicing the fastest.
For further reading on this topic see Developing a business case for e-invoicing – the-approach