Why Small Suppliers Hate E-Invoicing and eProcurement

If you listened to the constant stream of hype that Ariba has put into the market about smaller suppliers (really SMB suppliers overall) liking P2P, it would be easy to become brainwashed into thinking that small and mid-tier vendors like transacting online through eProcurement systems and sending invoices electronically. Granted, Ariba is not the problem here – smaller suppliers on the Ariba network, in fact, pay disproportionately less to transact, especially when invoice values are lower (and Ariba does a much better job than most P2P providers when it comes to holding supplier’s hands in the on-boarding process).

In fact, in the paper, Ariba Network Price Hike: Plan for Increased Supplier Fees in September 2010, Spend Matters outlines the cost/benefits for smaller suppliers of network participation compared with larger vendors. Yet generally speaking, especially when it comes to providers besides those that have dedicated teams assigned to manually assist suppliers with the on-boarding process – not just limited to registering to send e-invoices – the entire process of getting online to transact for SMB suppliers, including uploading and managing catalog content and responding to RFPs, is typically more cumbersome and less rewarding than advertised.

What stumbling blocks do suppliers typically encounter? Here are just a few:

  • Registration processes which require information from multiple stakeholders but which are not designed to support branching workflow that can be assigned by the supplier
  • The hassle of integrating financial systems (invoice creation / receivables) and mapping these into a customer’s P2P environment or indirectly through a network
  • Being made to think they will get more business from moving to online support for customers, but then realizing the move just means supporting existing customers in new ways
  • Paying transaction fees (either fixed or volume based) that cost more than offline processes
  • “Kludged” integration from supplier view, such as having to upload an invoice to a portal and re-enter data from an existing invoice that was created in the supplier’s accounting software
  • Supplier portal access for checking on invoice status (and related) with latent information that their customers do not necessarily update with accuracy and frequency
  • Having to go through the same process (or much of the same process) for different customers

Of course this list could go on – this is just a start. In the next installment in this series, we’ll consider specific supplier complaints from a recent Procurement Leaders blog post on the subject.

Voices (7)

  1. Market Dojo:

    Ha ha, thanks Pierre! We’re a good bunch really and we mean no harm. It’s a compliment to your blog really, as we take an interest in what you are writing about, or at least I hope you see it that way and that we are not being a pest.

    You’re right, we post as a company as we invest as a company in engaging with industry-leading practitioners, blogs, etc. like yourselves. We’re a small firm so if you gave us a call we’d all know who you are and would be very happy to chat.

    Nick Drewe @ Market Dojo

  2. Pierre Mitchell:

    OK Dojo, fair enough, especially since your comments are not completely commercial (unlike, say, Procurify), but you don’t even post your real name! Come out of the shadows and let’s have a proper discussion.

  3. Market Dojo:

    Hi Pierre, you’re correct in your assumption that it is an electronic PDF on our side. Not sure about our clients, but given the median turnover of our clients is circa $600m, it wouldn’t surprise me if some do, some don’t have e-invoicing capability.

    “Perennial comment board prowler” is a very derogatory way to describe a contributor to your blog who takes an interest in some of your articles. We average a comment to perhaps 1 in 20 articles, so the remark is very unjustified. I hope you don’t think this of all your readers who place occasional comments.

  4. Pierre Mitchell:

    Steve, it’s not just supply chain vs. supply chain, but information supply chain vs. information supply chain (BTW, I just ordered a used copy of your ‘herding geese’ book on amazon – looks interesting!). So, buyers who introduce more cost, risk, and error through poor information management (i.e., poor choices, expensive connectivity, etc.) will pay for their choices as suppliers pass those costs back. Companies like choice in B2B network connectivity – and OpenText agrees since they just announce to buy your firm today!

    Suppliers are also getting savvier, and even Market Dojo, our perennial comment board prowler, is a great example per above. I’m curious how they get 100% e-invoice automation via $12/month (I assume it includes “electronic” PDF to buyers who can’t do true eInvoicing on their side). We’ll investigate.

    Jens, we couldn’t agree more! Heck, SAP is working hard just to integrate to itself with the Ariba acquisition! The successful business networks in our view will provide this natively (e.g., Tradeshift with Intuit) or better yet through a PaaS model where such hosted integration services could be purchased seamlessly in an app marketplace of sorts. Sounds crazy, but we think such a Procurement PaaS is coming.

  5. Jens Brown @jensbrown:

    What needs to happen is an aknowledgement by proven players in this space (Ariba/SAP, Oracle, SciQuest, etc), that plug-ins to existing off theshelf accounting tools are required. Look at the amount of behind the scenes integration that applications link Intuit QuickBooks or FreshBooks have – it needs to be a blind process to the SMB and one enabled with little effort in their accounting/invoicing tool. Swivel chair integration and rekeying need are forever going to be obstacles – simple investment will solve this. Are you listening Intuit / Freshbooks, SAAS…..

  6. Market Dojo:

    We’re a small supplier so perhaps we can share our view, as we are also in the Ariba network.

    e-invoicing as a concept- love it. It’s all we do, having never sent out anything but an electronic invoice. We use the e-invoicing capability in our accounting software which costs $12 a month all-in. Not only is this extremely affordable and independent to how much business we transact through it, but it also ensures our accounts are accurate.

    It would be a significant burden to have to use dual systems, particularly if we are paying twice, and even more particularly that Ariba would be the more expensive one that adds zero value to us.

    Ariba also doesn’t work properly in Firefox, which is our web browser of choice, which seems strange for an outfit that established.

    In terms of an increase in business, we’ll have to see!

  7. STEVE KEIFER:

    Small suppliers may not like e-procurement and e-invoicing, but it is a cost of doing business. These days if you cannot do business electronically than you should be may not be able to do business at all.

    SCMWorld did a study in 2010 that found that approximately 90% of manufacturers surveyed view strengths in B2B e-commerce as a key factor in being “easy to do business with”; a competitive differentiator; and a key enabler of growing business at strategic accounts.

    But I do agree that the vendor needs to make the processe easier for SMBs as you point out.

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