An Electronic Invoicing Maturity Model: Discounting and Payment (Part 1)

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An Electronic Invoicing Maturity Model: P2P, Data and Systems Linkages (Part 1)
An Electronic Invoicing Maturity Model: P2P, Data and Systems Linkages (Part 2)

In a recent Spend Matters Compass Series Paper E-Invoicing Comes of Age -- Discovering What's Possible From the Latest Electronic Invoicing/Invoice Automation Capabilities, we incorporated a relatively basic, three-stage graphical maturity model for organizations to consider in assessing both their current capabilities as well as what they can expect as they become more sophisticated down the line. Today, we'll continue to share some of the findings from our maturity model research, drilling in on both Basic (Level 1) and Intermediate (Level 2) sophistication markers for e-invoicing in the area of discounting and payment.

At Level 1 maturity, we often see procurement and AP organizations coordinate only few, if any, activities together focused on anything but standard payment terms. Yes, discounted terms may be offered or entertained, such as "2% 10, net 30" which essentially states that the supplier is willing to take a 2% discount if paid within 10 days, versus the standard 30. But in reality, the broader supply base and buying organization are rarely (if ever) given the opportunity to act on the discount opportunity because of the time it takes to process and gain visibility into the invoice (with optional terms) itself. When it comes to payment at the Basic maturity stage, on-time payment percentage rates may be tracked and reported on, but they're often a moving target, and not a KPI priority.

Moving up the maturity curve, we begin to see a broader percentage of the supply base gain a realistic opportunity to offer and receive a discount (or a realistic opportunity for the buying organization to offer an early payment discount and have suppliers accept it). This stage is typically marked by just over 25% of suppliers being given a realistic opportunity (and time frame) to act on a discounting and early payment option. In other words, procurement and AP organizations have moved at this stage to an e-invoicing systems level (or relationship with a bank) that provides enough transparency, speed and overall visibility into invoicing, discounting and payment practice to allow suppliers to act. Or, alternatively, they can enable the possibility of discounting to a broader portion of their supply base because or a binary opt-in/opt-out approach to discounting, either provided by a bank or a specialized provider like Oxygen Finance.

For more on P2P, check out our latest free Compass research in the area:

A Foundational Look at P2P Technologies

E-Invoicing Comes of Age - Discovering What's Possible From the Latest Electronic Invoicing / Invoice Automation Capabilities

Jason Busch

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