There are numerous advantages to e-invoicing for the buyer, the supplier and for managers. This post will look at the advantages of using an e-invoicing system. It should also be noted that these advantages are also beneficial for an invoice finance facility.
Benefits for the Buyer
The first main benefit for the buyer is reduced costs. E-invoicing systems properly integrated into the systems of a company can eliminate the need for manually sorting, registering and inputting invoices into the digital sales ledger. It is estimated that the automation that e-invoicing offers reduces administration costs by up to 80%.
Moreover, automation removes the risk of any errors that might result from manually inputting invoices into the company records. This means the accounts payable department can improve its efficiency and waste less time phoning suppliers to check on invoice details.
The automation offered by e-invoicing speeds up the creation of invoices, the sending of invoices and thus improves the chances of timely payment. An invoice financier will be keener to supply reverse factoring to a client that uses e-invoicing as its invoices are less prone to human error.
The accounts department of the buyer benefits from e-invoicing as it becomes easier to reconcile their purchases with the e-invoices they have been sent. When a company regularly buys from one particular supplier it can sometimes be difficult to match deliveries to invoices.
Another major benefit for the buyer in using an e-invoicing system is that disputes with suppliers over delivery quantities, prices etc. are greatly reduced. This also benefits the whole supply chain, and enhances the relationships between all the business entities within a supply chain.
Benefits for the Supplier
The biggest benefit for a supplier in integrating e-invoicing into their IT systems is that payments for goods and services are speeded up. Invoices no longer have to be raised manually and either posted or sent in an email attachment. Rather, an e-invoice will be generated automatically when an order is sent out. And the buyer will have the e-invoice automatically checked and will be able to quickly approve payment and send out the payment. Such e-invoicing systems typically shave off 4 days from Days Sales Outstanding.
E-invoicing not only speeds up the payment of an invoice for a supplier it also reduces the costs of posting invoices, reprinting invoices, phone calls to customers and the storage of paper invoices. E-invoicing can reduce invoicing costs by 80%. Moreover, an invoice financier will be able to work remotely in managing the accounts receivable ledger and be able to make faster decisions about prepayments for invoices.
Another advantage of e-invoicing is that processing from the suppliers accounts receivable to the buyers accounts payable digital application is made nearly instantaneously. There is no need for the buyer to re-key in the information into their system thus reducing the potential for data entry errors and for invoices to be queried or rejected.
It is often the case that the buyer will pay a number of invoices at the same time. This can be a headache for the accounts department as it can be unclear what debts a payment is intended to cover. With e-invoicing a buyer can send electronic remittance advice with an electronic payment that provides details of invoice numbers to help reconcile the supplier’s accounts. The remittance advice can also detail debits, credits and adjustments caused by such things as items damaged in transit.
This information is also invaluable for an invoice financier in determining credit limits, funding percentages and the reliability of debtors. This information will also play a large role in making clear evidence-based decisions regarding managing a factoring facility.
All these benefits for the supplier in using e-invoicing make it an invaluable tool for business.
Benefits for Managers
Managers in purchasing, line of business managers and chief information officers (CIOs) all benefit from a company using an e-invoice system.
Account managers have instant access to invoices and so can keep a real time note of company finances. It also makes forecasting more reliable. Moreover, since e-invoicing helps speed up payments a business manager can happily note a reduction in the number for the cash conversion cycle and maintain a healthy working capital fund.
Managers dealing with companies abroad can use third party e-invoicing facilities to stay compliant with foreign tax rules. This avoids seeking costly expert advice for dealing with a customer in another country and makes it easier to enter new markets.
Integrating IT systems between two companies doing business through e-invoicing reduces disputes and helps managers foster long-term and warm relations.
And the good news for managers is that implanting an e-invoice system into their current IT system has become relatively straight forward and cheap. The cost for the initial set up of an e-invoicing system is quickly recouped by the savings made by going paperless. This makes selling the idea of e-invoicing to the key decision makers all the easier.
ESG or environment, society and governance targets and goals have become important for many business managers. ESG values are becoming part of the core values of many companies. Being able to eliminate paper from the invoicing system is a cost-effective way of reducing waste and lowering a company’s carbon footprint.
An E-invoice has, in many parts of the world, the same legal status as a paper invoice. With this in mind, the choice to integrate an e-invoicing system into a company’s IT systems is one of pros and cons. As the article above delineates there are numerous benefits for suppliers, buyers and managers in using e-invoices, not least that it saves money, resources and time.