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E-Invoicing Gains Traction Worldwide

15 July 2014 ID:G00230657
Analyst(s): Paolo Malinverno

VIEW SUMMARY
The adoption of e-invoicing is growing worldwide. The savings it provides have been proven but the
complexity of multinational e-invoicing is challenging. Application managers and procurement
executives should use this research to plan e-invoicing projects and to achieve cost savings and
benefits.

Overview
Key Findings
E-invoicing is about geography the trend changes sharply from country to country.
Because of all the changing regulations, the vast majority of e-invoicing projects will be
implemented by e-invoicing networks and integration brokerages.
A large amount of case studies of medium or high traffic (say, 10,000 e-invoices exchanged per
year, and upward) e-invoicing projects typically break even (that is, they pay back their own
costs) within a year.
E-invoicing grew steadily as a phenomenon in the past three to four years, because of pressure to
reap the benefits of process improvements, and the regulations approved by several countries
worldwide.

NOTE 1
ELECTRONIC DATA INTERCHANGE
The European directive explicitly talks about EDI as a
way of transporting invoice information having the
attributes of integrity and authenticity. But what is
EDI? The concept of "EDI" differs among countries,
and largely consists of rules that existed long before
the directive and other e-invoicing regulations around
the world. Frequently, the legal and business
definitions of these concepts are not the same. The
directive refers to a definition of EDI from a 1994
European Commission recommendation: "The
electronic transfer, from computer to computer, of
commercial and administrative data using an agreed
standard to structure an EDI message." In current
Gartner terminology this means "B2B infrastructure,
and associated protocols." Is Web EDI (where one
transacting partner manually keys in, supplements
and/or approves invoice data) EDI under the directive
meaning, and will tax authorities recognize it as such?
What trading partners consider EDI will not necessarily
be viewed as EDI by tax authorities, and vice versa.

It's only a matter of time before e-invoicing becomes a mandatory requirement, either by
regulation or because of your trading partners' requirements, wherever you are, whether you are
a buyer or a seller. Chances are that at least for a portion of your business partners, it is
mandatory already.

Recommendations
Start evaluating e-invoicing project opportunities now, regardless of your company's vertical
industry, size or financial shape.
Never underestimate the consequences of regulation diversity across countries; potential
problems are in the details.
Don't sell the benefits of e-invoicing internally in your company too quickly; multicountry
e-invoicing projects last years. Proceed with a succession of projects, go down the path of least
resistance first, turn as many transactions as you can into an electronic form, and demonstrate
their value one by one.

TABLE OF CONTENTS
CONTENTS
Analysis
E-Invoicing: A Definition
Basic Facts About E-Invoicing
Current Vendor Landscape
Regulations in the European Union
The Role of Governments Mandating E-Invoicing
E-Invoicing Is Easy (or Not) in Different Countries
E-Invoicing Challenges
E-Signatures, EDI or the "Third Option"?
Reasons for Doing E-Invoicing
The Main Reasons Why E-Invoicing Use Will Continue to Grow
Can Paper and "E" Go Together?
Extended List of Recommendations

Analysis
Overview
E-invoicing is finally growing worldwide, and that growth is set to continue for at least the next three to
five years. The savings have been proven, but the complexity of multinational e-invoicing projects is
deceptively challenging. Application managers, procurement executives, CIOs and business managers
should use this research to plan e-invoicing projects and to achieve the best cost savings and benefits.

E-Invoicing: A Definition
E-invoicing cuts through many disciplines, requires a lot of knowledge (spanning business, regulations

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and IT), and involves a lot of complexity. A good definition of e-invoicing is:
E-invoicing is the interchange and storage of legally valid invoices in electronic format only between
trading partners.
This interchange does not use or require paper-based invoices. E-invoices have legal validity, and can
be used to prove compliance (or as tax originals), which works under very different regulations in
different countries. This research is about e-invoicing in general, and most considerations apply
whether you are sending e-invoices or receiving them, unless otherwise stated. Operationally:
The seller must ensure that the invoice contains the correct data and that it is verifiably authentic.
The buyer must be assured that the invoice is verifiably compliant (authentic and, where
applicable, "cleared" by the tax administration), match it to goods or services received, and
execute payment under the terms agreed upon with the seller.
The seller and the buyer (or a third party on their behalf) must both securely store the compliant
invoice for a period of time (periods and conditions change widely country by country), and make
it available to a tax authority on request.

Basic Facts About E-Invoicing

Payments for goods and services account for about 30% of the gross domestic product of most
countries; several countries implement value-added tax (VAT) over those payments (for goods and
services), which means a lot of money made up of a lot of invoices. With good reason, tax authorities in
governments across the world have a strong interest in ensuring that companies exchange and store
invoices in a secure and reliable way to prevent taxation errors, and to minimize fraud. Invoices are not
the only business documents that tax administrations may want to verify, but they are a central
evidence component to tax auditing, and by far the most regulated business documents. Thus, tax
authorities typically rely heavily on the invoice to establish the veracity of a specific transaction.
E-invoicing makes a lot of business sense when a company has a clear, structured process, which, on
receipt of an invoice, reconciles it with goods and services delivered, accepts it automatically if an
agreed-on set of criteria is met, and starts payment. Implementing buyer e-invoicing is more
challenging in organizations with fragmented accounts payable (AP) systems and processes.
Organizations that have already implemented shared services for AP will realize the greatest benefits,
because they already have only a small number of locations where invoices are received and the
number of integration points is lower.
Where multiple AP systems are in place, implementing an AP invoice automation system can link
multiple AP systems to provide one point of interface for e-invoices. This normally adds complexity to
the project, but it adds a lot of value too. Some companies use the necessity of an e-invoicing project
(for example, to comply with a government regulation) to force an internal rationalization effort, and to
put some order into their existing processes in preparation for an electronic solution, because the
processes, at least on the surface, are not that difficult to change (they are just clerical AP processes).
But e-invoicing is not only about rationalization and putting processes into order; it is also about
optimizing compliance with local tax laws and integrating with the security infrastructure that is used to
exchange invoicing information and to keep the records.
E-invoicing affects internal business processes, mutual agreements among business partners, financial
transactions, taxes, legal compliance, and much of the application infrastructure that supports all this.
The business processes to get invoices paid (or issued) change, sometimes significantly, company by
company (and sometimes within a specific company, depending on trading partner agreements, or on
different business practices in different geographies, or on the type of invoice), and due to (tax) laws
and security norms (for example, e-signatures and how advanced/qualified they are, or the rules for
issuing them or obtaining certificates). On the other hand, for many buyer-supplier communities, the
continued, culture-induced prevalence of paper-based or fax-based invoices and the inertia it has
produced have severely limited the ability to leverage e-invoices to automate the purchase-orderto-invoice reconciliation process and the rest of the payment processes.
The preceding reasons are enough for some companies to decide, "E-invoicing is too complicated for
me, at least for today." But one fact introduces doubt into this perspective: The European Association of
Corporate Treasurers identified the average processing cost of a paper invoice across Europe to be
around 30. It also determined that by using e-invoicing, an 80% cost saving is possible. Confirming
this data, several case studies also indicate that e-invoicing has been proved to reduce the cost of
processing one invoice to less than 7. E-invoicing also offers a range of other potential benefits,
including improvements in AP processes by reducing invoice processing time and minimizing manual
intervention, thus leading to a reduction in operating expenses. This fact alone makes some companies
start e-invoicing projects, and it makes many more look deeper into the e-invoicing conundrum.
Several studies and surveys are available on the current e-invoicing uptake and on the projected
growth in the next years. Most of them forecast massive growth because they have a vested interest in
selling services for it, and the uptake varies significantly from country to country. So, e-invoicing is
possible, viable and beneficial today. The e-invoicing market (made up of several markets; see the
Current Vendor Landscape section) started from very little, and is now processing hundreds of millions
of e-invoices every year.
One immediate observation is that how you do e-invoicing does not depend only on where your
company has its headquarters or on the country where it is listed on the stock exchange; There are also
strong dependencies on the countries from which you receive e-invoices and to which you send
e-invoices. This is because you will have to conform to the norms and business practices of those
countries for the e-invoices to be valid there. This research is mainly about international e-invoicing, so
it is particularly relevant to companies that do business internationally. Because of the VAT implications
of e-invoicing, and because intercompany transactions are subject to VAT in countries with VAT
statutes, you may find that the simplest place to start an e-invoicing rollout is between you and (one
of) your foreign subsidiaries. However, even if a company only does business in a single, large country,
where e-invoicing is not mandated by government regulations (for example, the U.S.), the staggering
cost savings that come with e-invoicing still make it an interesting project.
No company that is conducting transactions electronically today will stop doing so nobody stops
doing e-invoicing. Current projects will only expand, because the more invoices processed
electronically, the more money saved. An accounting department that processes twice as many invoices

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in the same unit of time delivers immediate benefits in savings on resources and in customer
satisfaction (users of e-invoicing are starting to see more than 10 invoices processed per hour per
full-time equivalent [FTE]; see the Reasons for Doing E-Invoicing section). Proof-of-concept
implementations that began during the past year on a small percentage of invoices will be extended.
Gartner expects thousands of new projects to start worldwide just in the next year. Larger integration
brokerages offering e-invoicing services expect to at least double their e-invoice traffic in 2014. Again,
even from a conservative perspective, it's clear that the number of e-invoices exchanged worldwide will
see steady double-digit growth for the next few years (see the The Main Reasons Why E-Invoicing Use
Will Continue to Grow section).

Current Vendor Landscape

Many competing and varied vendors are trying to solve various aspects of e-invoicing, including:
Pure-play e-invoicing network providers, extending to more complex order-to-cash or procureto-pay processes (such as Anachron, Nipendo, Cegedim or Tradeshift)
Procurement and strategic sourcing application vendors (such as Basware, SAP [Ariba], Ivalua, or
Wax Digital)
Integration brokerages (such as Comarch, Edicom, OpenText [GXS], IBM, Liaison Technologies,
Pagero or Tieto)
Supply chain finance/dynamic discounting specialists (such as Taulia or Tungsten Network
[formerly OB10])
E-invoicing clearing houses (such as TrustWeaver)
Document processing automation, optical character reader (OCR), scan-and-capture companies
(such as Esker, Kofax, OpenText or ReadSoft)
Finance/accounts receivable (AR)/AP solution providers (such as ADP or Cortex)
Banks (such as Swedbank or ING), frequently using white-label versions of the above offerings
Historically, each vendor has addressed only one specific side of the e-invoicing puzzle. Even recently,
supplier (or buyer/incoming) e-invoicing frequently was addressed by a different set of vendors from
customer (seller/outgoing) e-invoicing, which frequently was addressed by a different set of vendors
than general e-archiving and the list can go on. Today, several leading offerings have expanded
significantly and provide services both ways, for incoming and outgoing e-invoice flows. Additionally,
several of the vendors named above offer functionality for more than one of the aspects listed.
In general, larger integration brokerages in B2B have been combining supplier/customer e-invoicing
with archiving for tax purposes, offering sophisticated integration services in the cloud for the whole
e-invoicing space across several countries. These offerings might still have functionality gaps, however,
thanks to ongoing interoperability efforts between different networks, they already have delivered
significant benefits, so they are now selling well.
E-invoicing solutions have a wide range of users:
IT staff to install, integrate and operate the solution (possibly outsourced)
Administrative payment/accounting staff (could be outsourced, too, but it's less frequent)
Tax auditors from tax and revenue agencies outside the company who want to see evidence of
real, paid, unchanged invoices (and all of them) kept for a number of years
The complexity of catering to such diverse groups of users adds to all the other difficulties of putting an
e-invoicing solution together (see the E-Invoicing Challenges section). Also, e-invoicing solutions need
to closely follow several moving targets in national regulations, and must immediately demonstrate
tangible benefits. For these reasons, e-invoicing solutions delivered as a service are much more popular
and easy to consume than software-based solutions.

Regulations in the European Union

The European Union (EU) has issued several directives in the area of VAT invoicing the latest one in
July 2010, which is effective on all 28 member states since the beginning of 2013 with a view "to
promote and further simplify invoicing rules by removing existing burdens and barriers. It (the
directive) establishes equal treatment between paper and electronic invoices without increasing the
administrative burden on paper invoices and has the aim to promote the uptake of e-invoicing by
allowing freedom of choice regarding the invoicing method." A core theme of the directive was to
promote the efficient cross-border creation, transmission, acceptance, storage and retrieval of invoices.
Since the first directive went into effect in 2001, all EU member states must accept e-invoices for VAT
purposes.
To allow for technological differences between each EU member state, and to remain technologyneutral, the directive allowed for three ways of meeting the main three requirements of authenticity,
integrity and legibility: business controls creating a reliable audit trail, advanced electronic signatures
and electronic data interchange (EDI).
While formally, the VAT laws in member states are now reasonably well-aligned on the highest level,
frequently this technological flexibility results in state-specific versions of the directive, which in practice
lead to disparate requirements for meeting the functional objectives. These requirements, in turn, have
led to more-stringent or less-stringent controls in different states.
Invoice storage location and retention period (ranging from three to 11 years) requirements also vary
widely among countries. Some countries have specific requirements about whether invoices under their
jurisdiction may only be stored in an EU country, or also outside the EU. There are also state-specific
requirements for the use of outsourcing providers that may or may not operate or be trusted in the
sender's or receiver's home country. Some countries require time stamps at specific points in the
e-invoice life cycle. All this information must be linked together for proper accounting and tax
processing.
The e-invoicing directive explicitly states that third parties may issue the invoice in the name and on
behalf of the supplier. It is generally assumed although usually not explicitly regulated that the
buyer can also outsource some or all tax-relevant processes to a third party. This opens up a variety of

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new lines of business for B2B infrastructure vendors to extend existing B2B projects to e-invoicing, and
to maximize the value of investments that IT end users have made in B2B projects.

The Role of Governments Mandating E-Invoicing

The first European government acting on e-invoicing was Denmark, which made e-invoicing mandatory
for the public sector in February 2005. The scanning of documents at the post office was possible
initially, but has since been replaced with direct sending. Approximately 15 million transactions that the
state previously handled on paper were then managed electronically, with huge benefits. According to
Claus Juhl, of the government's digital task force, public-sector savings amounted to around 100
million in three years; this result gains importance when you consider that Denmark's population at the
time was only 5 million.
Several other countries in Europe (including France, Italy, Portugal and Spain) have followed this
example, with the main intention of introducing efficiencies in the AR processes of government
departments processing invoices.
In the meantime, several governments in South America had a different idea. They advanced this
approach and used e-invoicing as a powerful weapon against tax evasion, on the basis that computers
are binary, and humans are not. Mexico and Brazil showed that early and mandatory involvement of
the tax office when an invoice is issued, and monitoring the subsequent logistic and payment
processes, enforce a proper tax payment and radically reduce the chances of evasion. So most
countries in South America (Mexico and Brazil started three to four years ago, but most other countries
are rapidly following their example) are in the middle of mandating e-invoicing for all sectors, with
increasingly stringent regulations, phased by industry sectors and company size. This model is
increasingly being taken up by countries outside South America, like South Korea and Turkey.
A government mandating e-invoicing for government departments makes a statement, but generally,
on its own, does not induce a massive uptake of e-invoicing in a specific country (as the U.S. proves). A
direct mandate, even for a subset of businesses in designated industry sectors (like the regulations
unfolding in Turkey, for example), has an obvious, very deep effect on businesses in that country, but
also on companies abroad that trade with them and have to abide by the same regulations. In this
case, e-invoicing uptake in that country is very rapid, generates several, local-only, immature managed
service offerings (which generally compete in brutal price wars), and frequently snowballs in all industry
sectors, not only the ones affected by the mandates. Following the initial panic, confusion and rapid
market consolidation, e-invoicing starts delivering hard benefits (see the Reasons for Doing E-Invoicing
section).

E-Invoicing Is Easy (or Not) in Different Countries

In some countries (like those in the Nordic region: Denmark, Finland, Norway and Sweden), e-invoicing
is taken for granted, as a normal working practice. Most invoices are e-invoices. Some companies even
apply payment penalties when they receive a paper invoice, because it is much more costly to process
and negates their process savings.
E-invoicing regulations are clear in most of the countries with significant international trading, with few
notable exceptions (like India and some countries in Africa). However, these regulations change in
time, frequently with just a few months' notice. The list below gives a rough indication of how easy (or
not) it might be to start e-invoicing programs in a specific country (Gartner specifically recommends
checking the status of a country at planning stage, and then again before starting implementation):
Countries where it is reasonably easy to do e-invoicing generally require businesses to
demonstrate integrity and authenticity of e-invoices, and archive them for auditing purposes for a
country-specific number of years; ways to meet these requirements can differ, but they are
generally well-understood. Sometimes, it is mandated that the archiving be on the company's
premises or with an outsourcer in the country (this requirement is generally relaxed in time).
Notable countries in this set include Australia, Canada, most countries in Europe (except the ones
explicitly listed in the following two bullet points), Hong Kong (currently a Special Administrative
Region of the People's Republic of China), Japan, New Zealand, Singapore and the United States.
In the rest of this document, we refer to this set of countries with the letter "E."
In other countries, doing e-invoicing requires further arrangements, but is still not that difficult.
These countries' regulations are much more prescriptive in describing what e-invoicing compliance
is, and frequently require digital signatures (and in some cases, time stamps) to assure integrity
and authenticity of the e-invoice. South American countries in this set prescribe a specific
XML-based invoice format. Notable countries in this set include Argentina, Colombia, Costa Rica,
Indonesia, Israel, Italy, Pakistan, Paraguay, Portugal, Serbia, South Africa, South Korea,
Switzerland, Taiwan, Tanzania, Thailand and Vietnam. In the rest of the document, we refer to
this set of countries with the letter "M" (for "moderate").
There are countries where doing e-invoicing is difficult, although regulations prescribe it as
mandatory (except for Russia and Guatemala) at least for a few industry sectors and for
companies above a certain size. In addition to the requirements of the previous bullet points,
e-invoices have to be precleared/authorized by government systems (generally through a certified
service provider). Notable countries in this set include Brazil, Chile, China (but legislation is still
evolving), Guatemala, Mexico, Peru, Russia, Turkey, Ukraine and Uruguay. Even more notably,
several of the most interesting (from an investment point of view) and growing economies
worldwide belong to this set. In the rest of this document, we refer to this set of countries with
the letter "D."
Please note that in the last two years, largely due to the continuing increase in regulations, the set of E
countries has been shrinking and the sets of M and D countries have been growing.

E-Invoicing Challenges
As anticipated by the considerations in the previous sections of this research, there are a number of
intricacies in doing multicountry e-invoicing projects. E-invoicing projects with all business partners in
one country are considerably easier, and this tends to be the initial focus of many emerging e-invoicing
projects, which are mainly aimed at gaining process efficiencies in the areas of AP and AR. This type of
project tends to be very common in very large countries, like the U.S. However, the vast majority of
midsize to large organizations in smaller countries have suppliers, sales channels or customers outside

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their home countries; and because the value of an e-invoicing solution typically is related to the number
of invoices processed electronically, restricting the projects to one country is not generally wise, viable
or both, and it might fatally skew the choice of a particular service provider.
This section highlights the main difficulties international e-invoicing projects suffer from, so that
stakeholders will be aware of and actively work to avoid them.
We have introduced the several axes of variance of e-invoicing requirements (internal and
multienterprise business processes, IT infrastructures, law and security, to name a few), and how they
cause differences. It is very common, for example, that different laws and regulations will apply to
business partners in different countries. This, by far, is the most common source of difficulties in
e-invoicing projects, and is compounded by regulations, the interpretation of them, and general
requirements that rapidly change in time.
At the moment, in several countries (especially outside Western Europe), there is a knowledge gap
between businesses and tax departments around requirements, liability and legal questions. Wide
knowledge differences frequently exist between different revenue department workers. Sometimes
businesses end up educating the revenue services on their own legislative texts, with the inevitable
delays for discussion and interpretation. Big accounting firms, such as PwC, Deloitte or EY, are only
slowly getting into the business of certifying e-invoicing solutions. However, these offerings are
generally costly, and come with intricate responsibility and liability clauses.
Additionally, if you are procuring or running an e-invoice solution, then how do you know for sure that it
is compliant with the EU directive, or with the various tax laws abroad? There is no such thing as
compliance with the EU directive itself; what matters is whether there is interoperability with your
business partners and fulfillment of local requirements as applied by local tax authorities, VAT laws and
general industry practices.
Other adoption challenges revolve around the classic B2B issue of business partner onboarding. Buyers
trying to mandate e-invoicing may struggle to get their suppliers to use it if they cannot force them
(that is, they are not a dominant supplier or a supply chain master). Also, because the market for
e-invoicing solutions is growing so fast, there are too many e-invoicing solutions. Suppliers are getting
fatigued by being asked by buyers to join several different e-invoicing networks. Consequently, buyers
considering e- invoicing networks (and that cannot "force" them on suppliers) should evaluate
e-invoicing providers based on the number of their suppliers that are active in the network, and the
ability of the e-invoicing provider to quickly and inexpensively onboard suppliers.

E-Signatures, EDI or the "Third Option"?

The European e-invoicing directive requires invoicing parties to guarantee the authenticity and integrity
of e-invoices in transport and in storage, through "business controls creating a reliable audit trail,"
advanced electronic signatures and EDI. To respect the various ways of guaranteeing authenticity and
integrity of the processes in use in Europe, and to allow each member state to build on the policies they
have already, the directive is not intentionally prescriptive. In the rest of the world, E countries are
generally not prescriptive on any of the three methods above (and they would mean any B2B protocol
when they say EDI, see Note 1), as long as authenticity and integrity of e-invoices is reasonably
guaranteed. M and D countries mandate electronic signatures.
Historically, different methods have been employed in different countries to guarantee the authenticity
and integrity of e-invoices. For example, there is a lot of EDI use in France and Germany, and a lot of
"business controls" in use in Canada and Australia, and most of these systems can guarantee integrity.
In a few cases, authenticity is guaranteed too, or can be guaranteed by extending the functionality of
the system (typically through e-signatures). But whether the tax authorities in all the countries where
you implement e-invoicing recognize those methods as valid for tax purposes is another question.
Security never was a necessary component of EDI. A lot of EDI systems are far from being secure,
because the threat of breach is not high enough and the potential damage of a breach can be
reasonably contained. In other words, the fact that a system can legally qualify as EDI does not
necessarily guarantee e-invoice integrity and authenticity. The VAT Directive indirectly imposes
additional requirements that systems must comply with under the EDI option. Furthermore, the fact
that you use EDI (remember the directive basically means generalized B2B with that term see the
E-Invoicing Challenges section) does not mean that you have to use the EDI option of the VAT
Directive. Modern B2B standards make room for the use of e-signatures; for example, point-to-point
security standards (like Applicability Statement [AS2]) are based on e-signatures as the most effective
way to guarantee integrity and authenticity (and nonrepudiation the receiver cannot say that it did
not receive the e-invoice). Most B2B networks run by integration brokerages use certificates for
authentication and/or signing of certain types of content.
E-signature interoperability is not perfect, and you certainly don't need even more problems in your
e-invoicing projects. However, consider that:
If your e-invoicing project includes business partners in M and D countries, then you have no
choice. These countries mandate e-signatures and you just have to use them.
Top e-invoicing pure-play networks, and the integration brokerages using their software (see the
Current Vendor Landscape section above), have made significant progress with interoperability
problems, and working solutions are in place for many countries.
E-signature requirements are fairly clearly defined in most countries. Many countries tie legal
certainty (including moving the burden of proof to the tax administration, which then has to
disprove e-invoice integrity and authenticity) to the use of high-end signatures.
E-signature software is now available at reasonable pricing (if you choose a service-based
offering, then you will use your service provider's software, and the cost of this approach is
generally subsidized between different users. In other words, if you do e-invoicing through a
service provider, then you don't need to worry about the cost of e-signature software).
The number of countries requiring signed invoices grew steadily in the past two years.
No matter how you do e-invoicing, the need for e-signatures will arise in some way when you start
analyzing how to implement integrity, authentication, secure storage or time stamps (required in
several M and D countries).
In summary, for your e-invoicing project:

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If your current ways of doing B2B:

Can guarantee the authenticity and integrity of e-invoices in transport and in storage
Allow you to easily demonstrate this for about a decade
Are accepted by the tax authorities in all the countries you are doing e-invoicing in
Then it's likely that your current B2B system can deliver all e-invoicing benefits (and you probably
are doing e-invoicing already).
If your current ways of doing B2B cannot guarantee the authenticity and integrity of e-invoices in
transport and in storage, then your systems are not future proof, and you are potentially sitting
on a time bomb. Urgently estimate how difficult and expensive it would be to add this function.
You are likely to be forced to introduce e-signatures at some point, by regulations in some of the
countries you transact with, but consider that the extension costs often are repaid quickly by the
savings (ensure that you carefully estimate savings and costs before starting the project).
If your B2B projects do not deal with invoices, or if extending their functionality proves to be too
costly, or if you are starting e-invoicing from the ground up, then you are better off planning for
an e-invoicing project using e-signatures from the start (at least optionally, despite all the
complexities associated with this approach).

Reasons for Doing E-Invoicing

So far, this research has surveyed several arguments illustrating the difficulties of e-invoicing. However,
there are excellent reasons that strongly push companies to face these complexities, deal with them
and start an e-invoicing project. And these reasons are definitely stronger that's why the e-invoicing
market has grown so much in the past three to four years, and will continue to grow for at least that
long.
To reduce invoice-processing costs, the first thing companies try is centralized invoice printing and
scanning (with or without optical character recognition). More large organizations are increasingly trying
this option, because they can negotiate costs down with printing and scanning providers and, thereby,
cut paper invoicing costs sometimes drastically somewhat reducing the pressure to move to
full-fledged e-invoicing. Printing and scanning do not require process adaptation, but are mainly
add-ons to well-tested paper-based processes. This alternative does provide savings, but only a fraction
of what an e-invoice project can deliver (see the Can Paper and "E" Go Together? section).
The next step, typically, is to formalize the existing, unchanged invoice-processing process(es) into a
business process management suite or a workflow. This puts more order into the work, and gives more
visibility over the processing of an invoice. However, in this case, the savings are marginal, and they
need to be offset from the costs of the software or services being used to support the workflow and to
train the invoice-processing staff to use the software.
Most of the e-invoice savings are due to more-streamlined payment processes, taking humans out of
the picture as much as possible, and providing the whole set of data that is needed to reconcile the
invoice with the goods or services received (typically, by integration with an ERP or an
accounting/financial application, on-premises or in the cloud). The vast majority of companies that have
done invoice printing and scanning have found that it does not provide enough benefits and have
moved on to something else. If you need to send e-invoices to companies in M or D countries, or the
supply chain masters who mandated (or will shortly mandate) e-invoices, then printing and scanning
will be of little use.
By implementing e-invoicing, you immediately remove one of the biggest issues in AP and AR the
processing of paper invoices. These frequently must be manually entered into the AP system, which is
time-consuming and error-prone. Also, when paper invoices are routed around the organization for
approval, they sometimes get lost and frequently get delayed.
Current case studies indicate that you can quantify e-invoicing savings in many ways, including the cost
per invoice, as above, or the total savings due to reduced number of resources and computing power
(60% to 80%, as compared to paper invoice processing), or even a percentage of a midsize to large
company's turnover (approximately 1%). Whichever way you decide to demonstrate savings, the clear
indication from case studies is that the savings for companies that have to deal with a large volume of
invoices (more than 100 per day, inbound and outbound) are significant, because of the economies of
scale obtained by aligning technical, business and compliance strategies. Other benefits include:
Better spending analysis, leading to some spending reduction
Faster processing times and payment cycles, leading to reductions of accounting staff
Enhanced contract performance analysis
Better tracking and enforcing of trading partner compliance with commercial terms
Improved dispute handling and avoidance
Opportunity to realize more supplier rebates, take early payment discounts and leverage dynamic
discounting
Better auditability of invoices through integrity and authenticity guarantees
Easier availability of data for regulatory compliance, for example, supply chain traceability
Greener approach, big reductions in consumption of paper
The potential for benefits is much greater for the e-invoices you receive than for the ones you send,
because, on the receiving end, you are improving internal processes for handling invoices. And, if you
have to process a lot of them, you will compound the benefits (which is why Gartner is seeing a bigger
uptake in supplier or buyer/incoming e-invoicing). However, e-invoicing does provide benefits to
senders, too, such as improved customer satisfaction; reduced administrative costs in credit collection;
more-effective capital management and cash-flow control (suppliers can see when invoices will be
settled, so they can forecast receipts more effectively); lower costs in paper (hitting a green
requirement) and postage; and, above all, lower customer churn. This would apply also to smaller
senders, which would not have the e-invoicing volumes of the buyers.
As always in B2B, the key in e-invoicing projects lies with the recognition of the shared benefits that
suppliers and buying organizations can realize. This typically implies improved business processes (with

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the associated organizational and change management challenges) and technology improvements.

The Main Reasons Why E-Invoicing Use Will Continue to Grow

After a few dormant years, e-invoicing adoption finally increased and showed solid growth in the past
three to four years. Although none of the following reasons in isolation is likely to be enough to warrant
continued growth, all of them together have been driving and will continue to drive increased
widespread adoption:
Strong user demand, because of the benefits, especially process improvements
Increased supply, and an associated increase in the maturity and effectiveness of e-invoicing
solutions in particular, several banks are promoting e-invoicing in their strategies (especially in
Europe)
More governments mandating e-invoicing, with more to come in the next years
Wide availability of viable (and compelling) e-invoicing references and case studies as more
companies adopt e-invoicing
Thus, e-invoicing will grow steadily during the next few years, despite all the difficulties summarized in
this research, simply because the momentum of these factors is stronger than the decelerating force of
the difficulties.
E-invoicing will be sold more and more with full order-to-cash B2B outsourcing, purchase order and
accounting system integration, dynamic discounting, self-service supplier invoice status check, payment
processing, supply chain finance, spend analytics, and less as a stand-alone solution for AP and AR
departments.

Can Paper and "E" Go Together?

The road to full e-invoicing is gradual. First, you will make electronic only a subset of all invoices,
according to several criteria (selected business partners or types of invoices, for example), then you will
gradually increase the number of invoices that can be dealt with automatically, or with minimal human
intervention. So, for practical purposes, paper and "e" will need to go together anyway for a few years.
During this transition, companies should ensure that a tax inspector can easily and clearly distinguish in
the accounting systems between what is done electronically and what is not. Companies tend to deal
with this years-long "transition" in different ways. Because of internal process intricacies (and because
it is hard to get small suppliers to go electronic), certain types of invoices will tend to stay on paper, at
least in the initial years of e-invoicing initiatives. The best solution providers offer scanning and
printing, so internally you might still treat those as electronic.
To ease the transition, some companies continue to accept and issue paper invoices, and to accept and
issue e-invoices at the same time for the same goods or services, as a sort of transition to full
e-invoicing. Receiving paper and electronic records for the same invoice will not remove the problem
(which, primarily, is processing the paper invoice), and will duplicate work. Except for brief periods of
time during pilot programs, this is not an ideal situation and dramatically raises the costs of dealing
with invoices, instead of driving them down.
More frequently, some companies receive invoices electronically, but also keep paper copies for tax and
legal purposes. Regulations are gradually ruling this practice out (for example, in Spain, once you have
an electronic invoice, the paper copy ceases to be valid). However, in a solution like this, you still incur
high invoice storage costs (driven down only partially by scanning) and higher fixed costs of
reconciliation between what is on paper and the electronic transactions. This means that you won't
harvest the full scale of benefits that e-invoicing can deliver.
Yet, there is plenty of room for development. In most countries, paper invoices still outnumber
e-invoices. But the tide is changing no company stops doing e-invoicing, and thousands do more
every month, in all geographies. Some people say that paper invoices have no future. In the long term,
it is difficult to disagree with them. In the short term and midterm, there is still a lot of complexity to
deal with, but the cost pressure of these difficult economic times, and the tangible benefits that even
partial e-invoicing solutions can deliver, can work wonders.
It is only a matter of time until e-invoicing becomes a mandatory requirement, wherever you are,
whatever size you are. Look into e-invoicing now.

Extended List of Recommendations

No matter what vertical industry or financial shape your company is in, start looking for
e-invoicing project savings opportunities now. Don't hold out for regulations and interoperability to
get better; you can reap good benefits from e-invoicing today.
If you are in an E country, start simple, go down the path of least resistance, but look at the
countries you will have to support in the next five years, and procure first a solution that can
address them all already. You don't want to be forced into managing another service provider and
interoperability with the first one you chose, in just one or two years from now.
If you are in an M or D country beware of new providers and single-country stopgap solutions.
E-invoicing projects last years and expand quickly. Make sure that the provider and the solution
you choose can prove enough overall viability history gives good indications.
Because of the speed of regulatory change in most countries, in 98% of cases it is simply not
viable to run software on-premises to do e-invoicing. There is a wide variety of service offerings in
the cloud, which will connect with your applications (on-premises and in the cloud). Obtain
guarantees from cloud service providers that they will keep the pace of international regulation
before you procure one of them.
Plan your e-invoicing projects based on how quickly you can get the highest number of invoices
processed automatically, and on the countries they touch the faster you build critical mass, the
greater the difference to your company's bottom line. In order to do this:
Calculate your current average invoice processing cost, and confirm it with the business.
Use this number to show the savings your e-invoicing projects have brought.
Create a business case that accounts for the true, anticipated volume of invoices that can be
electronically accepted and leveraged by your trading partners.
Take into account that the simplest point at which to start an e-invoicing rollout may be between

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you and (one of) your foreign subsidiaries:

In general, because e-invoicing often leverages existing B2B infrastructure, focus your initial
e-invoicing projects in E countries.
Beware of the further constraints and limitations on where your country (or the countries you
do e-invoicing to and from) allow e-invoices to be stored.
E-invoicing services are springing up worldwide, especially in D countries, so ensure that the
solution you choose:
Addresses all the three fundamental axes of e-invoicing (business process, law and security).
Is certified by tax auditors for as many countries as possible (especially those you have a
steady flow of invoices from and to) even if this is a Phase 2 requirement.
Connects with other service providers, e-invoice networks and banks.
Good technology applied to bad processes creates no benefit. If the data is messy, then
e-invoicing won't save you money (because of the degree of manual reconciliation work needed).
Don't sell the benefits internally in your company too quickly. Instead, proceed with a succession
of projects and demonstrate their value one by one. In a medium to large business, if you make
50% of all your invoicing traffic electronic in two years, then you're doing great.
Never underestimate the consequences of regulation diversity across countries; most problems
appear in the details. Work with your auditors to research and track, on an ongoing basis, the VAT
laws and e-invoice requirements in each country where business will be conducted to ensure
compliance. Or, work with the e-invoicing solution supplier that will provide these services.

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