OMB Closes In on Mandated E-Invoicing

When the Federal Reserve released its report “Strategies for Improving the U.S. Payments Systems” to much anticipation last month, it made a less-than earth-shattering debut. The paper included significant findings and suggestions on how to make the nation’s payments processes faster and more secure.

A key focus of these suggestions lands on the business-to-business procurement sector. In its report, the Fed recognizes the role electronic invoicing and electronic procurement practices can play in facilitating an overall more secure and efficient payments process, especially as the payments industry struggles to leave behind the comfortable but less-than-instant payment method of the paper check.

“The Federal Reserve investigated the merits of several strategies that have the potential to improve the attractiveness of electronic payments relative to the paper check,” the report reads. “Areas explored include….electronically created items that can be processed through check infrastructure and the identification of efficiency-enhancing features (like a universal e-invoicing system) that might be included in any faster payments solution.”

An e-invoicing plan would have major implications for the B2B procurement arena, the Fed noted, and would support its goals for the “adoption of secure business-to-business payments.”

But, as MPD CEO Karen Webster explained, the report overall was “a bit anticlimactic. And even a bit ironic that a move to deploy faster payments seems to be moving along so slowly.”

Indeed, the Fed spent 18 months researching for its report, which ultimately called for the formation of a task force, made up of industry stakeholders, to essentially continue that research. It’s a cautious approach to the Fed’s goals of a streamlined payments process for the nation, and progressing much slower than many would like.

One of the Fed’s goals, as outlined in its report, is to “explore the possibility of developing and implementing a standard, ubiquitous B2B electronic invoice and processing platform similar to ones that have been developed in other countries.”

And the Fed is right: federal e-invoicing mandates have flourished in other nations, saving taxpayers, encouraging foreign investment and nudging the private sector towards similar habits. But the Fed may want to look at the progress of e-invoicing programs in its own nation if it wants to make headway at home.


The OMB’s E-Invoicing Progress

Last week, reports emerged that the Executive Branch’s Office of Management and Budget has made a leap towards implementing the Fed’s goals within the government itself – a development that, if successful, may offer key insight for the Fed and encourage the private sector to follow suit.

Multiple media outlets reported that inside sources confirmed the existence of an OMB draft “Comply or Explain” memo that would require federal agencies to explain why they are not using the standard e-procurement platform first launched by the Treasury Department in 2007.

The platform, known as the Invoice Processing Platform, was established with several goals in mind, including the aim of reducing redundancy within government operations by offering a single, shared platform for procurement activities, saving money, increasing efficiency and, unofficially, pulling the government into the 21st century.

In a recent interview with Federal News Radio, OMB Controller David Mader declined to confirm the “Comply or Explain” memo, but told reporters that the OMB revealed more plans for greater IPP use at a previous Association of Government Accountants training event held in Washington, D.C.

“We’ve had conversations with the departments, with Treasury, and there is a high degree of interest, I think, on both parts to do something,” Mader said of the OMB’s goals for IPP usage. “We are not at liberty to say what we will do or when we will do it, but we are going to address it certainly in this calendar year.


Not Yet a Mandate

The OMB is pushing – now harder than ever – for the government and its vendors to use the IPP for invoicing and payment. But the alleged memo falls shy of an e-invoicing mandate for the government, and significant hurdles remain if a mandate were to ever emerge.

Currently, the Agriculture Department is the first and only agency to fully implement use of the IPP and all of its services.

And while about 80,000 vendors use the IPP’s services to submit and track invoices, reports say sources explain why IPP use is limited within government agencies. The Department of Defense and Department of Veterans Affairs, for example, reportedly limit use of the IPP because they already have internal systems at work that they feel meet their invoicing and procurement needs better than the IPP would.

The Fed found similar barriers to e-invoice and e-procurement adoption within the private sector in its report, including the complexity of e-payments and the lack of infrastructure (and lack of funds to implement such infrastructure) to support electronic invoicing and payment systems, both for the buyer and the supplier.


What the Fed Could Gain from the OMB’s Progress

Still, the OMB appears steadfast on promoting government-wide use of the IPP, a feat that could – as seen in other government programs – reveal benefits to businesses in both the private and public sectors.

According to the Treasury, government-wide use of the IPP would lead to cost savings of $450 million a year, and has already led to cost reductions of processing invoices by between 46 and 54 percent for government agencies using the system.

As the OMB continues its approach towards government e-invoicing, the Federal Reserve seems to have similar goals for the rest of the US, including that “standard, ubiquitous B2B electronic invoice and processing platform” its report mentions. But while examining the case studies of other nations’ e-invoicing ventures is valuable, the OMB seems to offer its own valuable insight into the e-invoicing and digital payments process.