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E-Invoicing The benefits of e-invoicing compliant supply chains
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Author Steven Paul 020 8774 3415 steven.paul@tailmanagement.co.uk OfficeTeam Ltd Unit 4, 500 Purley Way, Croydon, Surrey CR0 4NZ Internet: www.officeteam.co.uk Email: marketing@officeteam.co.uk Phone: 020 8774 3415
What is e-invoicing? Electronic invoicing (or e-invoicing) is a paperless electronic system for exchanging invoice documents between suppliers and buyers in place of the more traditional hard copy paper invoices. The electronic invoice contains data from the supplier in a format that can be integrated into the buyers Accounts Payable systems without additional input from the buyer. Common formats for e-invoicing are: • • •
Traditional EDI standards such as UN/EDIFACT, ODETTE and TRADACOMS; XML-based standards; Comma-delimited ASCII, PDF.
E-Invoicing effectively allows you to electronically generate, send, receive and process invoices in a secure environment, whilst removing the slow and manual processes and human error associated with a paper based manual invoicing model.
Why use e-invoicing and e-invoicing compliant suppliers? Many UK companies utilize e-invoicing. This is not purely due to governmental legislation, instead it is due to the clear benefits e-invoicing systems offer over traditional paper based invoicing. By utilizing e-invoicing and e-invoicing compliant suppliers you can realize the following benefits: Reduced costs The cost for processing e-invoices is typically estimated to be 30-60% lower than the cost of processing traditional paper based invoices. In some cases it is estimated that electronic invoicing reduced the processing cost per invoice by up to 75% (source: http://ec.europa.eu/internal_market/payments/docs/ sepa/sepa-capgemini_study-final_report_en.pdf) These cost savings are primarily due to the elimination of sorting, registering and manual data entry that is typically required for paper invoices. Cost savings are made in fraud and loss prevention as well as auditing costs for trading parties and tax authorities. Finally further savings are made through the reduction in raw material, transport (primarily postage) and storage costs.
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Invoice Generating Costs Printing Payment Reminder Remittence Archiving TOTAL
Paper Invoicing 3.90 0.50 4.50 2.20 11.10
E-Invoicing 0.24 0.40 3.00 0.80 4.44
Invoice Processing Costs Recieve Codification Validation & Matching Dispute Management Payment Archiving TOTAL
Paper Invoicing 1.10 3.00 4.00 2.50 4.80 2.20 17.60
E-Invoicing 0.00 0.00 1.20 2.00 2.00 0.80 6.00
Source: Deutsche Bank Research 2010
Reduced workloads Improved accuracy and increased automation reduces the workloads associated with handling invoices and addressing supplier queries. Internal staffs are no longer required to carry out data entry tasks and are therefore free to focus on core activities. Improved accuracy E-invoicing enables straight through processing of critical data into accounts payable systems without manual data entry and human error. E-invoicing also prevents suppliers backdating invoices as all invoices are time-stamped and all data is stored electronically with easy access for both parties. Increased processing and payment speed Automation of the invoice capture, routing and approval process provides a significant reduction in invoice processing times and increases on-time payment levels.
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Improved supplier relationships E-invoicing provides a clear accessible stream of information between buyers and suppliers. Improved data and accuracy improves communication, reducing queries (such as calls from suppliers asking about payment status) and costly invoice disputes. Faster processing and payment timescales benefit both parties and offers opportunities strategic trade discount negotiations. Eco Improvements E-invoicing is paperless, significantly reducing the paper and ink and wastage associated with the delivery and processing of paper based invoices. Delivery (primarily postage) and transportation fuel costs are rendered obsolete and the physical space required for storing paper invoices is drastically reduced. According to the Shared Services & Outsourcing Network (2012) over 30 billion invoices are sent across Europe every year. A typical invoice is 3 pages long meaning over 90 billion pages are printed and posted each year. If these invoices were sent electronically the 12.6 million trees, 13 billion litres of water and 5.4 billion KhW of power could be saved each year on the paper manufacturing alone. Improved compliance E-invoicing standardizes the e-invoicing process for buyers and suppliers and in the UK can be fully tax/VAT compliant. Many 3rd party e-invoicing systems are tax compliant across the European Union reducing the need for specialist tax expertise. Simplicity The user of e-invoicing leads to more consistency and standardisation of payment processes which helps to reduce organizational complexity for buyers and suppliers. The user of e-invoicing can increase internal workforce productivity and act as a learning tool by promoting the use of electronic practices and information technology.
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Why are some businesses not using e-invoicing systems? In the UK e-invoicing is not compulsory. It’s up to an individual business as to whether it issues paper or electronic VAT invoices. The exchange of e-invoices requires a specific investment in processes, system modernization, IT hardware and software costs and training costs. Return on investment is directly related to the number of invoices processed (the higher the number of invoices processed the quicker the ROI). This means that for many small and medium sized firms, particularly those generating modest invoice numbers and/or in low IT intensive sectors, the short term savings to be made by switching to an e-invoicing system are likely to be modest. Because of this the numbers of small to medium suppliers using e-invoicing systems is relatively low. Recent research by Deutsche bank estimates the numbers of small and medium suppliers currently issuing e-invoices to be as low as 10% and 15% respectively
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The History of e-invoicing Inception E- Invoicing is a relatively new field having originated in the 1970’s as the electronic data interchange (EDI). Initially EDI was primarily the reserve of large financial trading organizations due to the high development and implementation costs. The bespoke nature often meant that the format of electronic invoices was unique to the business it was developed for. With the rapid development of technology and the rise of the internet, e-invoicing quickly gained traction particularly in financial and legal markets; however the key driver for uptake in the EU was governments.
Government uptake In 2005 Denmark became the first country to make electronic invoicing mandatory in the business to government domain. All invoices sent to the Danish government were to be sent and processed electronically. Other European governments were quick to follow suit with mandatory e-invoicing including Finland (2010), Germany (2009), Italy (2007), Norway (2010), Spain (2010) and Sweden (2006). The success has led to wider uptake across the European Union culminating in the 2013 EU directive, which dictates that all EU members must afford the same legal status to electronic invoice processes as they do for paper invoices.The intention of the directive is to establish an environment that actively encourages all organizations to utilize e-invoicing when trading within both the public and private sector, nationally and across EU borders.
The modern market With all government suppliers already investing in e-invoicing technologies to perform public sector billing and invoicing the systems have been more widely adopted. The rapid development of technology, reduction in cost, standardization and promotion of e-invoicing across public sector providers has now fostered an environment where the technology is becoming widespread across the private sector. Man large and mid scale private sector organizations have already implemented e-invoicing systems, or are at some stage of transitioning to the technology due to the benefits it can offer.
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UK tax compliance One of the key reasons for the uptake of e-invoicing has been the push from EU legislation and the UK government along the capability to create a fully tax compliant invoice. This can be used by both the buyer and supplier for tax reclamation purposes. In the UK for a document transmitted electronically to be accepted as a tax invoice it must include the details laid down in the VAT regulations. With effect from 1st January 2004, tax invoices issued by a UK supplier to UK customers must include: • An identifying number • The time of the supply • The date of the issue of the document • The name, address and registration number of the supplier • The name and address of the person to whom the goods or services are supplied • A description of the goods or services provided • The rate of VAT and the amount payable, excluding VAT • The gross total amount payable, excluding VAT • The rate of any cash discount offered • The total amount of VAT chargeable, expressed in sterling • The unit price Rules for UK tax compliance can be found in full at: http://customs.hmrc.gov.uk/channelsPortalWebApp/ channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ ShowContent&propertyType=document&id=HMCE_PROD_010205#P19_1037
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About OfficeTeam Tail Management Our Tail Management service is part of the OfficeTeam group. Our specialist solution is designed to allow your business to consolidate the procurement of all your indirect products and services under one supplier. By working as an extension of your finance, procurement, supply chain and logistics teams we enable you to increase efficiency, reduce workloads and reduce your total cost of procurement. Because we are fully e-invoicing compliant we can manage your smaller, ad-hoc and non complaint suppliers on your behalf allowing you to enjoy full compliance across your supply chain, whilst also realizing the following benefits: Reduced total cost of procurement Benefit from reduced costs across multiple products and services across your Indirect/GNFR supply chain. Our single source solution and tail management enables you to consolidate providing the ability to leverage spend by bulk buying across multiple product and services categories. Our account management team are experts at providing further cost saving initiatives through product alternatives and opportunities for reduced consumption in order to achieve further savings. Improved visibility and control of expenditure Consolidated invoicing across multiple products and categories, alongside specialist controls including bespoke product catalogues and spend restrictions. Our management reporting and account management reviews provide total visibility and increased centralised control of your business expenditure. Specialist knowledge OfficeTeam’s in house specialists are experts in each product and services category we offer. Our specialist advice and product knowledge provides your procurement teams and internal stakeholders with the information and support they require to make the best decision for your business. Information is made available on an on-demand basis increasing flexibility and reducing internal headcount across your organisation.
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Improved business performance By establishing a centralised approach for managing your non-core GNFR spend you will benefit from simplified internal administration and free up human resource capital. Logistical expertise Utilise OfficeTeam’s unique logistics platform across the whole of your tail supply chain. Benefit from our ability to source, stock and distribute products quickly and efficiently on a national basis. Intelligent stock management allows for increased fill rates and reduced inventory need with real time information on scheduling and product availability through all stages of the supply chain. Refined best of breed solutions Benefit from our extensive experience sector experience including optimised processes and procedures. Our service is proven with established relationships in place many of the UK’s leading brands including Waitrose, Gala Coral, YHA ,Ocado, Timberland, GSK, Aston Martin, John Lewis, Majestic Wines, Fred Perry, 99P Stores, Phase 8, Amazon.co.uk and FCUK to name a few,
Contact us: At OfficeTeam our solutions are always bespoke, tailored to your business and your specific needs. To find out how we can help your retail business contact us on: 0844 822 1700 www.tailmanagement.co.uk Copyright: Steven Paul, OfficeTeam Ltd.
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To find out how we can help your business call us on:
0844 822 1700 Or visit us on the web at:
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