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With an Eye Toward Electronic Invoicing, Digital Networks Support Comprehensive Spend Management

by Chris Rauen

By treating accounts payable as a silo, many e-invoice systems fall short of their potential.

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If an electronic invoicing system meets the needs of accounts payable but operates in isolation from the rest of the enterprise, how much value does it add?

Plenty — if you’re doing business in the 1990s. Since then, many types of electronic invoicing systems have entered a crowded marketplace, all seeking — with varying degrees of success — to streamline the complex and often tedious effort to process invoices globally.

In today’s digital economy, remarkable new business value comes from linking invoice data to contracts, purchase orders, service entry sheets, and goods receipt for automated matching. Furthermore, automation of the invoice management process must extend beyond enterprise operations to include suppliers.  Yet few platforms enable this. By treating accounts payable as a silo, many e-invoice systems fall short of their potential.

How can linking electronic invoicing with an enterprise’s other operational systems, and to suppliers, unlock this value? It turns out that a holistic approach to invoice management in a digital age reduces costly errors, strengthens compliance, and facilitates collaboration both within the organization and among trading partners.

Digital networks marshaling the disparately held data from buyers and suppliers can help to reduce invoice errors. Yet if the underlying information is faulty, then networks risk merely amplifying it. To reduce invoice errors effectively, a digital network must rely on intelligence — not just that of the individuals entering the data, though that’s helpful, but through smart invoicing rules that are essential to a business network. These rules effectively validate invoices before posting for payment to streamline invoice processing, reduce operating costs, lower the risk of overpayment and fraud, and maximize opportunities for early payment discounts.

By enabling real-time collaboration between buyers and suppliers, digital networks not only bridge the information gap that can delay prompt invoice processing, but they also reduce the complexity often associated with compliance. That includes effectively vetting suppliers and monitoring business policies before a transaction takes place.

A cloud-based network can assess trading partners across hundreds of criteria, from whether they have the governance structures in place to root out forced labor from their supply chain to how well they document responsible stewardship of natural resources to their track record in awarding business to women- and minority-owned suppliers. In addition, digital networks help organizations to navigate the challenging reporting requirements for local and cross-border taxes. Of course, while software alone cannot ensure compliance with ever-changing tax policies across jurisdictions, it remains a powerful tool aiding internal audit and treasury’s efforts to achieve it. Compliance, once a cumbersome task that fell to a dedicated team, now can be managed from a dashboard.

As crucial as data accuracy and compliance are to e-invoicing, perhaps the greatest advantage of digital networks is collaboration. Issuing an invoice, even when accurate and on-time, typically resembles a one-way, asynchronous conversation. A buyer receives an agreed-upon product or service from a supplier, who at a later date sends out an invoice and, at an even later date, receives payment. The scenario plays out much the same as it did decades ago. But the advent of digital networks challenges that paradigm. The immediacy of network communications begs the question: Should electronic invoicing merely replicate the age-old process that postal mail once facilitated? Or shall it improve upon it?

Foresighted chief procurement officers are increasingly opting for the latter. Through their day-to-day experience with digital networks, they have come to view invoice processing as one component of the broader exchange of real-time information among trading partners. An electronic invoice reflects a snapshot of the multi-party collaboration that networks enable, and — through intelligent business rules — flags potential errors or exceptions relating to the transaction. As buyers and suppliers extend collaboration to product design, innovation and product delivery, you can expand the scope of electronic invoicing to capture up-to-the-minute progress reports on the teamwork within and across organizations.

Does your electronic invoicing system focus its sights only on accounts payable? Or does it open a window onto the rest of your operations and those of your trading partners as well — a window through which collaboration and mutual growth are within reach?
Chris Rauen is Senior Manager, Solutions Marketing at SAP Ariba