e-invoicing – one size doesn’t fit all

e-invoicing – one size doesn’t fit all

Posted by Pete Loughlin in Electronic Invoicing 27 Mar 2011

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

  • tim woodhouse March 28, 2011 at 12:16 pm /

    Absolutely agree! and something I have been saying for a long time it’s not a ‘tug of war’ between e-invoicing and OCR/Data Capture – it’s all about selecting the right solution for the segment you are looking to automate. Solutions can live in harmony without trying to discredit each other’s view so I agree some of your suppliers will be suited to e-invoicing and some will be suited to scanning and OCR’ing paper – or is there another way? a third automation opportunity? watch this space I hope to be able to tell you more very soon

  • Abdul-Azis Ayunan April 6, 2011 at 4:20 am /

    I agree! Thanks for taking this opportunity to discuss this, I feel fervently about this and I like learning about this subject. Software Philippines

  • James R. Clawson July 15, 2011 at 4:37 pm /

    Electronic invoicing for one person may mean a totally different thing for some one else. Your Hybrid Method will be the best way to reach full payable automation or authentic electronic invoicing!

  • Jay Stumpff May 11, 2012 at 5:44 pm /

    This is the solution we have chosen to use. We also utilize a few other solutions such as ERS (Evaluated Receipt Settlement) where the goods receipt of a PO will create the invoice document in sort of a self bill approach. We pay the vendor based on the PO price and the goods receipt shows that we have received to product so we pay for what we receive. This works well when dealing with materials where we have fixed pricing.
    The one drawback to our solution is our electronic invoicing (ePayables) is processed differently than our paper invoices (iPay). Both are processed in SAP but in two different locations. The internal users sometimes have more of a preference as to which system they want to use. Some like the paper process better because of their preference to the GUI we use while others like the detail they receive in our ePayables solution.

  • for details January 24, 2013 at 8:50 am /

    I was unaware of this methodology till now. Thanks for the post. I should probably start some self research on e-invoicing. Thanks for the initial push. Looking forward to more posts from you on this and many more in future.

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