B2B Payments

Government Programs Encourage Digitization of B2B Invoicing

It’s not often that governments are ahead of the curve when it comes to new technology, but the latest data show that federal programs around the world are pulling the public sector into electronic invoicing, resulting in millions of dollars in cost savings.

The digital trend may seem like a no-brainer, but the adoption of e-invoicing for private sector firms has been slow. A study released last October by IDC Manufacturing found that fewer than 50 percent of the companies it surveyed are classified as “high adopters” of electronic trading methods, including e-invoicing.

“This is particularly surprising when considering today’s need for collaborative information exchange processes,” the study noted. “It exposes the limits of current electronic networks, which are neither pervasive nor structured to be able to support manufacturers in their day-to-day activities.”

But governments today are playing a major role in the adoption of e-invoicing – for both B2G and B2B operations.

The Expansion of Government E-Invoicing Mandates

The markets in Latin America has plowed the way for adopting electronic invoicing in government operations. According to electronic billing developer Edicom, more than half of 2014’s electronic billing exchanged across the globe took place in Latin America – that’s about 25 billion e-invoices. Chile has emerged as one of the region’s leaders in this realm after mandating e-invoicing in 2014, a move that officials estimate will save the nation $600 million annually and greatly reduce tax fraud. Similarly, Argentina, Brazil, Guatemala and Mexico have all implemented government-mandated electronic billing programs.

Asia, too, is ahead of the pack. Singapore has been lauded as a leader of the e-invoicing movement in the Asia Pacific region, with mandated digital invoicing by the government since 2008; South Korea has mandated it since 2010. Several other nations in the region have launched pilot programs to ease into requiring digital invoicing between the government and its suppliers.

Further west, government mandates are not as prevalent, but are still rising. Slovenia launched its mandatory B2G e-invoicing rules on the first day of 2015, while Switzerland will implement similar rules beginning in 2016, while Norway, Spain, Ireland, Belgium, Portugal and others are also exploring that path. France is looking to require digital invoicing across the public sector by 2020, a move experts say will lead to $814 million in taxpayer savings every year. In the US, the Department of the Treasury announced in 2011 that e-invoicing would be required, estimating that the program would save the government about $450 million annually.

Hurdles for the Private Sector

With the success of these government programs, why hasn’t the private sector caught on as quickly to e-invoicing? Several hurdles are slowing that process, according to research.

In the UK, data from Neopost UK found that government rules surrounding e-invoicing have caused significant confusion among SMEs especially. A Neopost survey found that half of SMEs in the UK were unsure of the regulations for digital invoicing, for example whether electronic certification is required. That same research also found that more than half of SMEs surveyed still produce their physical invoices one-by-one, despite invoices accounting for about one-third of all outgoing communication for the small companies – perhaps because of that confusion around government e-invoicing regulations.

“These statistics clearly indicate that too many small business still rely on inefficient, unsustainable invoicing procedures,” Neopost Digital Solutions Director Erwan Kernevez said, noting that late payments – a dire problem in the UK – should be reason enough for SMEs to adopt e-invoicing.

But experts say that some small businesses, in addition to holding uncertainties regarding the legislation of e-invoicing, argue they lack the necessary IT infrastructure to support sending and receiving the documents, especially in Malaysia, Thailand and the Philippines.

IDC Manufacturing’s study found that the Consumer Packaged Goods industry lags particularly far behind: nearly half of the companies surveyed said they trade electronically with less than 25 percent of their partners. Nearly half of the firms also admitted that the only reason they moved to e-invoicing was on the insistence of their customers.

How The B2B Sector Is Overcoming These Challenges

Despite these challenges, especially for SMEs, in going digital, research shows that the adoption of e-invoicing in the B2B space is progressing steadily. In fact, IDC found that governments’ mandatory e-invoicing programs contribute greatly in encouraging the private sector to follow suit. Edicom likewise found that these mandates are spearheading the modernization of the B2B2G, so B2B adoption of e-invoicing is inevitable.

Despite less-than-promising statistics from the CPG market, ICD’s study found that the automotive industry is quickly going digital in its B2B operations – about two-thirds of the automotive companies surveyed said they already exchange information with their trading partners in real-time. What’s more, the research found that nearly 80 percent of companies in the high-tech market are considered “high adopters” of e-invoicing and other digital B2B networking technologies.

The trend, experts say, demonstrates how the benefits of e-invoicing – proven by the success of government programs – far outweigh the struggle to implement the technology. Nearly 60 percent of those high-tech firms reported a reduction in procurement costs thanks to adopting these technologies.

Thanks to that estimation of $600 million in annual savings for Chile, for example, the government plans to mandate e-invoicing for all industries by 2018. In Norway, the government e-invoicing project saw half of the program’s first million transactions being conducted in the B2B space.

Industry experts believe that buyers and suppliers throughout the globe will only continue to adopt e-invoicing due to demonstrated successes by early adopters and the proven benefits of the practice.

“Electronic invoicing, which is gaining popularity throughout Europe, can help UK SMEs become more efficient, reduce their costs and ensure regulatory compliance,” Kernevez said. “In essence, it removes the time challenges associated with paper invoicing by automatically generating tailored invoices which are stamped with an easily traceable electronic pathway that allows the sender to check they’ve been received.”

Yes, there is the benefit of reduced costs for companies, as revealed in a 2013 Ardent Partners study. But e-invoicing also leads to less obvious pros: fewer invoicing errors, the elimination of manual data entry, efficient approval process, and beyond.

“Many manufacturers are starting to realize that a number of business benefits can be attained through adopting a modern B2B approach that goes beyond cost reduction and achieves the business value that better integration and collaboration can bring to enterprises,” the ICD study concluded.

And while companies that integrate e-invoicing into their business practices can enjoy a more efficient cycle time, reduced inventory and improved productivity, e-invoicing adoption supports global business in the B2B realm. Ardent Partners found that with the rise of e-invoicing, businesses are supporting their international commerce networks; the study found that 19 percent of these companies are already using these networks, but that number is expected to hit 41 percent within the next two years.

Looking ahead, the next two years will also show a rapid increase in the adoption of e-invoicing. According to Ardent, while 29 percent of companies surveyed are using digital invoices, 55 percent of companies plan to adopt the technology by 2017.

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