For buyers
Most people believe that buyers will generally achieve more benefits from electronic invoicing than suppliers. This is because the buyer is provided with economies of scale in processing large volumes of invoices electronically. Key benefits for buyers include:
Reduced costs
With the elimination of sorting, registering and manual data entry of paper invoices, an electronic invoicing process can yield savings of 60–80 per cent, with a payback period of six to eighteen months.
Increased accuracy
Electronic capture of invoices enables straight-through processing of critical business data into accounts payable systems without relying on error-prone, manual re-keying of data.
Increased Accounts Payable productivity
As a result of increased invoice accuracy, the amount of re-work required due to invoice errors is reduced. In addition, there is a smaller volume of supplier phone calls to accounts payable centres.
Faster processing and payment cycles
Electronic invoicing can fully automate the invoice capture, routing and approval process. This allows invoices to be processed much more quickly. Faster processing enables on-time payment, avoids late payment fees, and delivers the opportunity to capture contractually negotiated discounts.
Focus on higher value activities
Staff are freed from low-value data entry tasks to focus on more strategic activities such as auditing and validating invoices or exploring opportunities for early payment discounts.
More trade discount opportunities
Electronic invoicing enables faster processing and approval of invoices. As a result, you can take full advantage of timely payment discounts. There are several different models for early payments, ranging from buyer-managed invoice discounting programmes, supplier receivables factoring programmes, bank-led supply chain finance programmes and multi-bank electronic marketplaces such as the Receivables Exchange. Each of the different models from receivables factoring to supply chain finance appeals to different types of companies.
Enhanced account reconciliation
Suppliers are often challenged to reconcile the payments they receive from customers against the original invoices they submitted. To reduce banking fees, customers will frequently consolidate payments for multiple invoices into one single funds transfer. Additionally, customers may claim deductions against an invoice due to shipment problems such as damaged or missing items. Upon receiving a consolidated payment, confused suppliers will frequently call the buyer’s AP department to enquire about the details behind funds received. To simplify account reconciliation for suppliers, customers should send electronic remittance advices along with a payment that provides a detailed accounting of the invoices paid as well as debits, credits or adjustments taken.
Improved dispute handling and avoidance
Invoice disputes can cost from 50 euros to significantly more to resolve, resulting in inefficiencies in the financial supply chain. The faster, more accurate payments that are enabled by electronic invoicing greatly reduces the number of calls from suppliers asking about payment status or disputing payment amounts.
Improved relationships with suppliers
An effective payment process will become a cornerstone of a good strategic relationship with your suppliers. This, in turn, helps ensure more collaborative relationships which ultimately result in better customer service, a stable supply chain and improved on-shelf availability.
Maximising the benefits of electronic invoicing
To maximise the benefits of electronic invoicing for buyers, you should look to a model of centralised AP processes supported by shared services. In this way, you have a greater degree of control over the quality of your invoice data. Otherwise, bad data will require a great deal of manual reconciliation work, undermining any benefits you can achieve from electronic invoicing.
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