B2B Payments

Why E-Invoicing Isn’t A One-Size-Fits-All Solution

Basware has never missed a beat when it comes to promoting the benefits of electronic invoicing. The e-invoicing service provider has worked with governments around the globe to help launch digital procurement practices, and at every step highlights the ability for e-invoicing to save money, boost efficiency, and increase transparency.

It seems like a no-brainer, then, that governments and businesses should adopt e-invoicing. That’s what makes the question posed by Basware’s newest white paper, “Why Are Governments Not Paperless?” so compelling.

As it turns out, while the benefits of e-invoicing are vast, not all are equally attractive to every nation. The reasons for adopting – or not adopting – digital procurement strategies range greatly across national boarders.

“From cost and efficiency benefits to compliance and control, the priorities for e-invoicing are wide ranging and often highly personalized to an individual country,” said a Basware Corporation statement.

Where E-Invoice Adoption Is Low

Citing statistics from Billentis, Basware notes that an estimated 170 billion invoices are sent from businesses and governments every year. Less than 10 percent, however, are sent electronically. Why is this so?

Basware suggests differing reasons for e-invoice adoption based on geographical location. Belgium, in particular, is lagging in digital procurement methods. This is a curious finding, as Europe is one of the front-runners for global e-invoicing. But according to Basware, a strong postal service (and therefore a reliable way to send and receive paper invoices) coupled with a lack in technical expertise has prevented some parts of Europe, especially Belgium, from implementing e-invoice mandates.

Even the U.S. and U.K. were highlighted by Basware as failing to meet their full potential when it comes to e-invoicing. On average, Basware said that processing a paper invoice can cost more than $65 when accounting for processing time, error-fixing and other factors. E-invoicing, however, can lower that cost to just $6.50 – meaning businesses and governments across Europe and the U.S. are missing out on major savings.

But it’s Asia, Basware said, that has faced the most challenges in boosting e-procurement. In some nations like the Philippines or India, labor costs are low, and therefore the cost benefit of shifting to e-invoicing is not as stark as it would be in other regions. Asia also contains several nations that run a less formal economy, such as Thailand or Cambodia. According to Basware, if these nations can gain control of their unregulated economies, the benefits of electronic invoicing will be realized.

In a recent interview with CNBC, Cass Business School senior lecturer Canan Kocabasoglu-Hillmer said that leadership and infrastructure are two main challenges for some nations. “The challenges tend to be primarily driven by the complexity of the invoicing processes and leadership needed during the transition,” the expert on supply chain management said.

According to Basware’s Esa Tihila, those leaders can come from the private sector. “When creating infrastructure and processes for automation, invoicing and e-invoicing, governments can learn from businesses,” he said. According to research, this leadership goes both ways: government mandates of e-invoicing can also encourage the private sector to follow suit.

Where E-Invoice Adoption Is High

Not every nation is struggling to adopt electronic invoicing and digital procurement strategies. Despite the U.K., Belgium and a few other outliers, Europe as a whole processes more electronic invoices than any other region on the planet. According to the European E-Invoicing Service Providers Association, the region processed and delivers 840 million electronic invoices in 2013 alone. That figure, experts said, represented a 19 percent increase from the year prior.

Denmark is clearly at the head of this adoption, operating at 90 percent capacity of e-invoicing practices, while other Nordic countries like Finland and Norway have similarly positioned themselves in the lead of e-invoicing, due largely in part to government mandates. Basware cites Europe’s overall economic stability for this trend, as well as its Europe 2020 objectives, which encourage businesses to adopt the infrastructure necessary to accept electronic invoices.

The progress means governments can more adequately track tax revenue, as many nations in South America, including Ecuador and Peru, implement an e-invoicing mandate straight from federal tax departments. In other South American nations like Mexico, however, compliance remains the driving factor behind e-invoice adoption.

Differing Motivations

It may initially appear straight-forward: e-invoicing has many benefits, therefore governments and businesses should adopt e-invoicing practices. But as Basware’s latest paper suggests, every nation has its own needs that could be met by e-invoicing in different ways, and every nation has its own challenges to recognize those advantages. From varying sizes in SME populations to the differing degrees of tax compliance, e-invoicing can improve many aspects of a national economy. It’s just a matter of governments acknowledging which improvements are most necessary for their economies.

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