“Companies can not only save costs and time but also enable themselves to be paid faster by joining the Nationwide E-Invoicing Network” - E-Invoice Project Office, Infocomm Media Development Authority
Most companies have embraced technology to improve internal functions such as finance, human resource, CRM and ERP systems today. These systems, though have helped companies improve efficiency, have not been able to pluck the productivity gap in business to business interactions since they are all not connected to each other. One clear example of a common business to business interaction is the exchange of financial document such as invoice.
In Singapore today, majority of companies (seller) issue invoice by extracting the data from their finance/ERP systems and formatting it in human-readable form and sending to the buyers via paper or email. On the receiving end (buyer), manual effort is required to enter or scan the information into their systems which is a time-consuming and error-prone process.
A study conducted by IMDA shows that it costs an average of $8 to handle a manual invoice. For an average business that receives 1000 invoices a month, it will cost them about $100,000 a year just to process invoices. This does not include handling errors and the frustration of chasing for payments.
The problem has been recognised mostly by the buyer side for a while now and some have ventured to solve it on their own by deploying a platform that connects their suppliers or having a portal where all their suppliers log in and provide clean data to them. Unfortunately, such solutions do not scale as the suppliers will have to participate independently on multiple platforms. Large suppliers refusing to participate on these platforms is also a common problem faced by these buyers. These are termed as 3-corner model.
In the current 3-corner model scenario, companies enjoy automated exchange of invoices within the agreed upon platform arrangements, but complications often occur every time you have to establish an agreed arrangement with a new participant on the platform. This model also result in suppliers having to participate on several platforms to conduct businesses and it can be hard to keep track of all the different formats required by different companies.
Today, IMDA has introduced a much better approach to solving this problem using a scalable 4-corner model network. E-Invoicing is redefined as the automated exchange of requests for payment between suppliers and buyers using a structured digital format. The Nationwide E-Invoicing Network adopts the Peppol framework which allows direct transmission of e-invoices from one finance system to another without human intervention, speeding up invoice processing which results in faster payment. This greatly reduces the time spent verifying invoices and chasing for payment.
In the Peppol network, documents are exchanged using a common XML format known as the BIS (Business Interoperability Specifications) Billing 3.0 UBL.
To the CIOs, supporting this initiative can be a quick win and a valued contribution towards establishing a better system architecture leading to systemic change on how businesses can exchange structured documents
This common standard allows users to choose their preferred finance and ERP platforms, while being able to exchange invoices with their partners who may not be using same platform. The 4-corner model brings about interoperability with the introduction of Access Points which serve as gateways into the Peppol network. Access Points take up the responsibility of mapping invoices of various formats into well-defined UBL-based format and send them to the receiving Access Points through the Peppol network.
The illustration gives an overview of the 4-corner model. In a transaction, the seller’s objective is to successfully send an invoice to the finance system of the buyer. Regardless of invoice format, documents that are sent out by the seller (corner 1) will be converted into the common BIS 3.0 standard at its Access Point (corner 2). The global directory will provide necessary information to corner 2 to identify the receiving Access Point (corner 3) for the e-invoice to be sent through the network. Upon receiving the e-invoice, corner 3 will map the e-invoice into the preferred format of the buyer (corner 4). This network eliminates the need for businesses to sign up with different systems.
E-invoicing over the Peppol network reduces the risks for error which can delay payments. It also reduces printing of invoices and paper usage, thereby reducing the carbon footprint and helping businesses contribute to their eco-friendly sustainability initiatives. The finance department, both the accounts payable and accounts receivable units, can appreciate the problem this initiative is attempting to solve. According to Mr Tom Van Der Lee Finance, director of the Dairy Farm Group which has joined the e-invoicing network, “Manual invoicing is not only long and painful –there is also a high risk of human errors”. Companies such as Johnson & Johnson, Fuji Xerox and others have also started their journey in establishing their connection to the network through the help of authorised Access Points approved by IMDA.
Joining the e-invoicing network involves a one-off exercise of mapping the finance business systems data format to the Peppol standard, deploying the runtime data conversion and establishing the data transfer mechanism. Most of the time, the effort is small as compared to other IT projects involving the financial systems and can be done in a relatively short time. Some businesses may ride on the effort and take longer time to optimise further their business processes to maximise their gains from this change.
The Peppol network is not new. There are already great success especially in the Nordic countries. In Singapore, after having started early this year, the network participation has started growing with several hundred businesses connected with more than 20,000 transactions a month. The Singapore government procurement will support e-invoicing through the Peppol network in 2020 and will be encouraging all suppliers to send their invoices through this new channel.
Apart from Access Points that can help companies with in-house enterprise systems connect to the network, there are also cloud-based Accounting/ERP solution providers who are already connected to the network to serve enterprises of different scale. Lightweight solutions are also available for companies handling low-volume transactions, some with free or freemium offerings available to lessen the burden for any party who wants to participate.
For more information on e-invoicing and the list of service providers available on the Peppol network, visit www.imda.gov.sg/einvoice.
To the CIOs, supporting this initiative can be a quick win and a valued contribution towards establishing a better system architecture leading to systemic change on how businesses can exchange structured documents. As businesses become more interconnected, across industries and borders, the benefits of automation and built-in intelligence of business processes will clearly outweigh the cost of implementation. IT departments with interoperable systems are in a good position to morph offer their clients end-to-end, frictionless, emphatic and possibly anticipatory services. The less human intervention is involved in repetitive transactional processes, the more efficient businesses will be, creating more opportunities and cash flow for innovation. We encourage all businesses to get onboard the e-invoicing journey as part of Singapore’s digitalisation efforts.