E-Invoicing

Every year millions of invoices are exchanged between suppliers and buyers in the supply chain. The traditional way of invoice sending is through the route of paper or e-mail.

But more and more companies are finding that electronic invoicing is the better way to conduct business; it is faster, cheaper, error-free and streamlines directly into your accounting process. It is also more environmentally friendly than the paper or e-mail route.

Electronic devices linked to the internet are numerous. Having said that, it is more likely that some processes and operations which have been done manually are going to be computerized. When you computerize manual tasks, it enables you to optimize your business and enable it to run at maximum efficiency. Sending of invoices also is all set to be computerized.

What is an electronic invoice?

An electronic invoice is electronic all through its complete life cycle; this implies that creation, dispatch, payment as well as financial bookkeeping occurs via a computer system from beginning to end.

But this is not to be confused with a digital invoice. The latter is only a paper invoice that has been digitized, mostly in PDF format. As such, digital invoices differ from electronic invoices as they need manual work to record information from invoice to books. This involves human involvement and not a completely computerized/ electronic process.

Though the umbrella term is ‘invoice’, the E-invoice or Electronic invoice refers to credit notes, debit notes, purchase orders, payment instructions and terms as well as remittance slips that are completely electronic.

Typically, electronic invoices are sent in the form of .CSV or. XML files. But e-invoices are available in various other formats and web-based forms. For example, CurrencyPay provides an electronic invoice portal where users can send invoices via e-mail which include embedded payment links. Such links permit invoices to be paid by simply one click.

Benefits Of E-Invoice for Suppliers

• Enhanced cash flow through faster payment

When the paper and PDF invoices are received from the supplier, the buyer has to rout, sort, re-key and submit invoices for approval. Such a process takes time. There is also the possibility of invoices getting lost.

In contrast, e-invoices are easily accessible on the buyer’s system and can be routed and approved in a quicker way. As a result, payments are made in time, which enhances cash flow.

• Superior reconciliation of accounts

One of the challenges faced by a supplier is the reconciliation of invoices issued to customers against payments received. Customers can combine multiple invoices in one single payment. In addition, such a payment amount can vary from original invoices because of different reasons like customers claiming deductions for the sake of damaged goods.

Therefore, a supplier may issue 5 invoices worth $2000 each and gain a single payment of $9000. For this anomaly, he may have to contact the AP (Accounts Payable) department for clarifying details about the payment. By using e-invoices, customers can send details of invoices paid and payments made to help simplify reconciliation of accounts.

• Reduction in costs

When suppliers adopt e-invoicing, they can enjoy a substantial reduction in costs linked with printing, storing, processing as well as delivery of paper invoices. The enhanced accuracy of e-invoicing also implies the requirement of fewer customer service calls.

• Less rejection of invoices and disputes

The incidents of invoice rejections and disputes are time-consuming and costly to resolve and can lead to late payments. But in case of e-invoicing, data from the AR (Accounts Receivable) of the supplier is transmitted directly to the AP (Accounts Payable) system of the customer which reduces the risk of errors caused by data re-entry. Thus, the potential of rejected invoices is lowered.

• Enhanced customer satisfaction 

Because of the faster processing of e-invoicing and fewer payment issues, suppliers can offer a superior degree of customer satisfaction. This leads to higher rates of customer retention.

Benefits for Buyers

• Enhanced automation and productivity

In case of PDF or paper invoices, documents need to be sorted, stored, and re-entered to the AP system. Such steps, particularly data re-entry, is insidiously prone to error and time-consuming.

With regard to e-invoicing, data is transferred directly from the supplier to the AP system of the buyer, avoiding the requirement of manual re-entry of data. Because of reduced workload, accounting employees can focus attention on other high-value activities.

The system of e-invoicing enables AP departments to automate validations of invoices prior to routing them to the line of business managers for the sake of approval. Such validations ensure that all the calculations like GST or VAT are accurate. They also help identify what goods are being bought by which departments.

• Invoice validation 

E-invoices also help match invoices with other procurement documents like purchase orders and contracts. For example, prices on the invoice should match those in the contract. The description of goods should match those on the goods receipt. Such validations can now be conducted automatically using e-invoicing.

Since data entry and validations are automated, there is less requirement for buyer’s staff to call the supplier for confirming the receipt of invoices or make enquiries about details. There are much greater benefits of e-invoicing if this system comes equipped with a portal for suppliers. This enables suppliers to monitor the status of invoices and also payment and approval details.

Suppliers are able to know if their invoices have been received, whether they have been approved and which have been submitted for payment. Hence, the requirement of follow-up calls has been substantially reduced.

• Reduction in costs

Because of the reduction or total elimination of manual data entry, the processes of sorting, validation and registration of invoices, the system of e-invoicing can deliver substantial cost savings of 60 to 80%.

• Exploit discounts for early payments

Suppliers are mostly willing to provide a discount in exchange for early payments. E-invoicing permits faster processing and therefore, shorter payment cycles. Hence, buyers using e-invoices have greater access to chances of discounts.

• Enhanced relationship with suppliers

An efficient and fast payment mode will surely help make strong the relationship with suppliers. This will result in a more streamlined supply chain and enhanced customer satisfaction.

Benefits for Both Buyers and Suppliers

• Carbon footprint

E-invoicing totally gets rid of the need for paper. This has a direct impact on the level of deforestation in the world. Also, much effort is spared for producing and transporting paper documents.

• Accuracy

E-invoices are likely to be more accurate than paper or digital invoices. While generating e-invoices, there are fewer steps and less friction in the invoice process. Manual entry and processing of data carry a high risk of human error.

Because of the several benefits of e-invoicing, more and more companies are switching to or constructing e-invoicing systems. The latter is more efficient, cheaper, more accurate and safer for the environment, in comparison to digital or paper invoicing methods.