B2B Payments

How The World Is Making Paper Invoices Digital

In recent months we’ve seen the pressures confronting the B2B space as have not been seen before.  That’s due, of course, to the pandemic, which has exposed the vagaries of a market worth tens of trillions of dollars largely dependent on paper checks, and paper invoices.

It’s the streamlining of invoicing — and digitizing them — that can help lead to the digitization of payments.  After all, sending those digital versions of payment requests can, at a basic level, include embedded links that allow for direct payments. Automated generation of invoices also match up with purchase orders, and ensure accuracy, and no need to pick up the phone or double-check that goods and services performed or delivered are detailed in a way that makes supply chains more efficient.

How To Get There 

But, ah — how to get there is the question.  In some cases, digital-first or forward-thinking companies might stipulate that invoices be presented in a certain (paperless) way, and across many countries, governments mandate that suppliers they contract with embrace eInvoicing. And in still other approaches, consortiums of private firms work with government agencies and even central banks to modernize invoices.

To get a sense of some widespread — and let’s call them top-down — efforts, as mandated by officials in India, the government has said that beginning in April of 2021, all invoices will be electronically tendered.  The government, as reported in the Hindustan Times, introduced the new system at the beginning of this month, with commentary from finance secretary (as reported in various sources) Ajay Bhustan Pandrey as stating that “it is a great step forward as e-invoicing has many advantages both for the business and the tax administration. Buyers and sellers will be able to have realtime information of the invoices.”

The recent push in India is reminiscent of other initiatives, where, for example, in Europe, national (but not necessarily EU wide) efforts to bring invoicing to the digital realm can be seen. In Germany, as we noted earlier in the year, central, regional and local authorities now require government vendors to submit electronic invoices in one of two standards. Elsewhere, Australia and New Zealand have also pursued standards since 2018.

Here in the states, the Business Payments Coalition (BPC), billed as a volunteer group of organizations and individuals, to get a better insight into data, that is asking for industry input on data and processes connected to invoicing. The BPC is working with the Federal Reserve to organize a program to develop a digital invoicing exchange blueprint for the U.S. market.

The digital invoice, which links accounts receivable (AR) and accounts payable (AP), might, depending on the region, see a tailwind akin to various payments schemes — such as the U.K.’s Faster Payments banking initiative (spurred on by the U.K. Treasury). Or, we see in the states, any number of B2B payment tech companies have sought to move us away from paper-based processes, even as there’s a U.S. mandate that focuses on government agencies. We’ve noted continuing efforts from Taulia, Basware, Tradeshift and others.

But: The free markets are also a mix of offerings, standards, tech-driven products and services. In the Fed’s 2018 report “U.S. Adoption of Electronic Invoicing: Challenges and Opportunities” the central bank wrote that “a large difference between the U.S. and other countries is the size and diversity of the marketplace. To implement a standard eInvoicing, the technical framework, semantics and syntax models and legal requirements in the U.S. would require significant coordination between governments and businesses and among businesses on a scale not required in other countries that have mandated eInvoicing.”

The great digital shift has upended much — and pushed us to re-examine paper checks, a scrutiny better late than never, with governments and private firms (sometimes jointly) doing the scrutinizing.

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