Over the past 10 years, I have seen the terminology of e-Invoicing mean many things. In most cases, many managers will still view this as eliminating paper via OCR and Workflow -- well others now view the term synonymous with government compliance.
However, the one concept I have yet to hear in my meetings around e-Invoicing is "Strategic". Most organizations look at e-Invoicing, especially in the realm of Accounts Payables as a purely "Operational" issue. But in the current global economy, the operational issues have a direct effect on the strategic issues.
For example, the most common requests in Accounts Payables are:
- Help me eliminate Paper processes for Invoicing & Payment (checks)
- How can we automate expensive manual reconciliation process
- Can we shorten long cycle times (45-60+ days) so that our FTE's are more efficient
- I need to comply with the Tax Authorities around the globe to avoid audits
These requests always come down to a fundamental dollar savings. Whether we are talking about efficiency, time or restructuring such as shared services or BPO, the concept always comes down to cost savings. And well these cost savings, must justify an automation project: they should not be the only concept scrutinized.
I say this because when my meetings move beyond Accounts Payables to the office of the CFO and Treasurer, the requests change.
The common iss
ues I hear on the Strategic level include:
- Inability to optimize cash flow (e.g., Missed Discounts)
- Liquidity concerns for supplier operations
- Short-term investment of Cash
So here comes my big question. If the Strategic issues can only be accomplished if the Operational issues are solved, why are the operational issues only looked at from a cost savings point of view during evaluations. Rarely in the AP evaluations do we take a deeper look at dynamic discounting or other Supply Chain Finance topics.
For a CFO, where can you make a 36% annual rate of return on highly guaranteed short-term loans (they are your key suppliers) well helping your supplier with their liquidity needs.
e-Invoicing is the gateway into Supply Chain Finance. Only with full automation and Straight Through Processing of invoices can an organization really achieve an effective supply chain finance program.
So this leads me to my next question: why do companies focus on e-Invoicing rollouts in Europe when Latin America has already accomplished electronifying their supplier's invoices. Next time, we will explore AP e-Invoicing in more detail.
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