Examining the Reasons Electronic Invoicing Will Truly Cross the Proverbial Adoption Chasm (Part 2)

Please click here for the first post in this series.

The "partial" solution to electronic invoicing seems alive and well, based on some of the survey response data in the Institute of Financial Operations/IAPP/Basware 2011 study on the subject. This partial solution we speak of is, of course, scanning. In the survey, 56.5% of respondents reported using internal scanning services. An additional 11.9% report using external scanning providers with roughly 30% not reporting any use of scanning capabilities. Spend Matters research suggests that OCR/scanning capability can be an important means for some organizations of managing the electronic invoicing process for smaller suppliers, especially those pushing invoices on only a periodic or occasional basis (e.g., <20 invoices per year).

However, scan/capture solutions should never stand-alone. When it comes to organizations that process invoices electronically today, 19% report using an electronic invoice processing solution to facilitate their electronic invoicing capability. 31% report using an "ERP/accounts payable solution", 3% use an "internet bank portal," 15% use an "e-invoice portal" and 50% report printing out electronic invoices as a means of facilitating processing. Curiously, the report suggests that "of the approximately 20 percent of respondents who process electronic invoices, a disproportionately high number of those companies implemented their e-invoice system five or more years ago."

Clearly, the hard dollar savings that companies are leaving on the paper invoice table by not moving to approaches that focus on true invoice automation rather than quasi-electronic capturing models is significant. In an upcoming research study on the topic, we suggest that just a foundational basis looking at transaction costs alone, organizations often find that it is possible to reduce per-invoice costs by as much as 70% (or even more, in certain cases) as a result of a comprehensive electronic invoicing deployment. And once procurement and finance begin to factor quality (including the costs of quality), variability and related metrics into the equation, this number can climb significantly higher.

Yet these cost savings do not always factor into the top decision factors driving adoption alone. The IAAP/Basware study reports that 79% of organizations view "speeding up the invoicing process" as one of the most compelling reasons for driving adoption of these solutions. In comparison, "reducing invoicing costs" and reducing invoicing errors" fall into the "most compelling" investment rationale 67% and 60% of the time, respectively. Spend Matters research suggests that additional rationale also often factor in the adoption equation, especially in more sophisticated programs. These include the ability to better manage and affect working capital management strategies and to improve data at the source to vastly reduce the potential of duplicate payments and eliminate the need to bring in invoice/audit firms to look for credits and other reclamation opportunities.

Our research also suggests supplier management costs can factor into a compelling rationale to invest in the area. In our forthcoming analysis, we suggest, for example, that more advanced finance and procurement organizations also tend to analyze metrics that may consider the typical cost to maintain and keep current supplier profile information on an annual basis, percent of supplier profile changes/updates requiring manual (AP/ procurement) intervention, cost to gather new information from suppliers related to regulatory (or related) requirements impacting AP, etc.

Stay tuned as our analysis of the latest IAPP/Basware research study continues (as well as previews of our own forthcoming research on the same subject).

Jason Busch

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