B2B Payments

Why The E-Invoice Isn’t Enough

The electronic invoice is considered one of the most simple, yet crucial, ways for companies to streamline their procurement practices. With so many benefits cited by industry experts of the e-invoice — increased transparency, cost savings and faster payments, to name a few — it’s a wonder why many companies still use the paper check.

A new white paper by AP automation firm Corcentric, authored by the Institute of Financial Management, finds, however, that the adoption of the electronic invoice is far from enough to fully strengthen corporate spend procedures.

The paper, “5 Ways Senior Finance Executives are Improving Visibility Across the Procure-to-Pay Cycle,” dictates that e-invoicing is just one step to improving cash flow and spend visibility within the corporate treasury department. In addition to the e-invoice, companies should adopt electronic purchase orders, invoice processing, ERP integration and electronic payments methods — all of which are part of the greater goal of cash flow management that e-invoicing cannot achieve alone.

All E-Invoices Are Not Created Equal

Corporations today are hounded with the need to bring their invoicing procedures into the digital age. But according to Corcentric and the IOFM, not all e-invoices are created equal.

According to the IOFM, citing research from Ardent Partners, nearly three quarters of all invoices generated or received by companies are still manual invoices. An important distinction in this finding, however, is that even companies that use PDF or emailed invoices instead of paper-based ones are, in essence, still using paper invoices.

“Unless there’s a data capture solution in place, that electronic transaction may as well be paper, because it still needs to be manually keyed,” the paper concluded. Simply sending or receiving an invoice electronically is not enough.

Further, even for those companies that do adopt electronic invoicing practices that allow for data aggregation and analytics, by itself the e-invoice will not adequately strengthen a company’s spend visibility.

So far, researchers have found that companies are struggling to achieve this first step, with more than two-thirds of companies reporting that more than 90 percent of all invoices handled require some type of manual intervention.

More Than The E-Invoice 

In addition to adopting a digital invoice procedure, Corcentric and the IOFM found several other methods to improve spend visibility within a corporation. These include the use of the electronic purchase order, an invoice processing tool and the integration of an enterprise resource planning service.

Electronic purchase orders, the paper concluded, allow companies not only to digitize and capture the data from their orders but can often allow for customizable controls that help companies enforce their spending rules. An invoice processing tool is key to automating the data capture from e-invoices, while an ERP system can synchronize with procurement and payment data to provide an overall tool to manage corporate finances.

Electronic payments are an especially important part of the equation for companies that are looking to improve their cash flow visibility. According to the paper, this is one area where businesses are making tangible improvements.

“Slowly, but surely, electronic payments are winning the battle against paper checks,” the IOFM said, adding that according to Ardent Partners research, more than half of payments to suppliers are already electronic. The IOFM’s own research has corroborated this trend, finding that companies are increasing their use of both ACH payments and the corporate card to pay their suppliers.

Eighty-one percent of survey respondents, the IOFM found, either receive or generate e-payments through ACH, about half said they use commercial cards and 35 percent said they use wire transfers. A major contributor to this rise in e-payment adoption, the paper found, is the heightened number of suppliers that are willing to accept these payment forms.

Electronic payments are necessary for companies to automate their accounts payable operations and save procurement officials time by automating payment notifications to suppliers. The IOFM also noted that e-payments provide those officials with greater security and, as with other aspects of the procure-to-pay cycle, provide the data necessary to gain insight into cash flow patterns.

Despite the rise in e-payment use, the IOFM found that 8 percent of those surveyed still use paper checks to pay their suppliers — a procedure that is “inefficient, prone to fraud” and not conducive to contributing data to analyze spend habits.

A Long Road Ahead

In assessing the five best practices companies should use if they want to improve their cash flow visibility, the IOFM and Corcentric have also highlighted just how far some companies have to go before they can achieve the automated procure-to-pay cycle that provides that financial insight.

Paper-based checks are still in use by companies. Even as businesses migrate to electronic invoices to manage buyer-supplier transactions and even for those procurement officials sending and receiving an invoice via email, without an automated data capture mechanism in place, those PDFs landing in a company inbox might as well be paper.

The findings are set against the backdrop of rising demand for greater cash flow insight. According to the IOFM, cash flow analysis and AP/AR payments management were cited by respondents as their top two priorities for the year. With more companies aware of the potential fallouts of less efficient procurement methods, it’s no surprise businesses are putting cash flow visibility improvement at the top of their to-do lists.

“Lack of insight into cash management across the procurement lifecycle can have long-term and negative financial impact on an organization,” said Corcentric Vice President of Sales Jim Wright in a statement last week. “This new research provides executives with a clear pathway forward to improve efficiency and reduce costs for enterprise spend, allowing for better decision-making and regulatory compliance.”

But, more than just e-invoicing, e-payments, ERP, invoice processing and digital purchase orders are all part of the puzzle and will be key.

“Improvements in these areas would deliver greater visibility and control of the procure-to-pay process,” the white paper concluded, “while contributing to trading partner relationships, corporate agility and value to the bottom line.”


New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.

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