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Benefits of Electronic Invoicing

February 26, 2019
Lynne Berg

Electronic invoicing, or e-invoicing, is a form of electronic billing used by customers and their suppliers. Creating invoices the traditional way is an extensive paper-based process and manually intensive. It’s prone to human error which can result in increased costs and prolong processing. Many companies already do some Electronic Data Interchange (EDI) along the supply chain, so adding e-invoicing is a logical enhancement and a good step towards automating the whole supply chain. Automating as much of the chain as possible provides significant efficiency gains, which ultimately improves your bottom line.

Often times, there is confusion on what is a true e-invoice. By definition an e-invoice contains data from the supplier in a format that can be integrated into the buyer’s Accounts Payable system without requiring data input from the buyer’s AP team. Take a look:

A true e-invoice contains:
Structured invoice data that follows an established, predefined format like EDI (X12 or EDIFACT) or XML.

What is not a true e-invoice:
Unstructured data issued in a PDF or Word format.
Data manually entered into an online invoice form or supplier portal website.
Paper invoices sent via fax.

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Manual Invoicing versus E-Invoicing at a Glance

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Manual process

Time-consuming document management and costly manual problems.

Long delivery time and no visibility to whether it’s received.

No feedback on data validity; customer may reject the invoice days later if key data is missing or incorrect.

No assurance that invoice is routed to the correct person or department.

Manual entry of data into AP, causing delayed entry and higher potential for errors.

Invoice may contain discrepancies from the order or contract terms. Manual matching is time-consuming and expensive.

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Dispute resolution with the supplier done by phone or unstructured e-mail; can be very time consuming.

Payment process can be delayed and discounts missed.

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Manual archiving requires storage and creates high costs for manual searches and duplicate invoices.

E-invoice

Invoices are sent automatically and securely.

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Real-time delivery with receipt/download confirmation.

Validation of key data as soon as it is sent.

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Automatically sent directly to AP.

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Automatically imported to AP system offering real-time import and accurate data.

Compliance and valication of key data is done automatically, matching line items with order data and contract terms. Faster analysis leading to cost savings.

Many dispute messages are automated, providing real-time exchange of accurate information.

Payment of relevant invoice data can be processed directly and automatically into payment orders.

Archiving is automatic and original invoices are searchable based on keywords.

 

Taking advantage of EDI 810’s (invoices) creates significant opportunities to reduce your costs. While there isn’t an exact figure, various experts like Sterling Commerce have found that the average cost of a manual invoice can range from $12 to $30. By automating invoicing, the cost can be reduced to just $3.50!  For an organization that processes up to 10,000 invoices per month that can translate to huge cost savings!  When calculating your costs to process your invoices, consider these factors:

  • Transit time for emailed or mailed invoices.
  • Hours spent manually reviewing and reconciling each invoice.
  • Hours spent finding and correcting data entry errors.
  • Cost of handling and archiving invoices.
  • Lost discounts or late fees from slowly processed invoices.
  • Lost hours of productivity for value-added work (instead of data entry).

Once you review these factors, you’ll be able to determine the true savings you would experience with EDI. You’ll reduce costs not only in labor but supplies as well. It will also speed up your cash flow!

Although significant cost and time savings can be achieved by removing paper and manual processing from your invoicing, the real benefits of e-invoicing come with the level of integration between you and your trading partners and between your invoicing software and other business systems.

Since 1991, Data Communication Solutions’ (DCS) clients have enjoyed the benefits of our expertise in EDI. Every one of our EDI Specialists is an expert in service and compliance issues related to EDI. Partner with DCS as your Solutions Provider and learn how our DCS Consultants can help you simplify your EDI and reduce your costs and risk by adding e-invoicing! Contact Data Communication Solutions today.