Electronic invoicing over a global business network holds great potential for organizations looking to transform their AP operations through improved trading partner collaboration, productivity breakthroughs, dramatic cost reductions, and the opportunity to manage cash better. The cost savings are considerable, ranging anywhere from 60% to 80% in operational cost reduction and more than $13 million per $1 billion in spend when you account for additional benefits: improved compliance, better management of working capital, and the capture of line-level invoice data for more efficient spend analysis and sourcing.
But not all business networks are created equal. To reap the full benefits that they can provide, you must find an open network that both you and your trading partners can connect to - regardless of the backend systems you're using. Then, and only then, can you achieve the Holy Grail of electronic invoicing… With many networks to choose from, how can you identify the right one?
Start by asking the following ten questions:
Question 1 - Does the network support a broad set of business rules for invoice validation?
A key objective for processing invoices over a business network is the potential for straight-through processing, eliminating the many data entry errors and match exceptions so characteristic of paper-based invoicing. So look for a network that has equivalent levels of business rules for automated invoice validation. With a broad set of invoice validation rules, you can reject dirty invoices automatically back to your suppliers. Without them, you’ll only be passing bad invoices faster.
Question 2 - Does the network manage the processing of a core set of business documents, not just the invoice?
Just as a limited number of invoice validation business rules will limit the reach of e-invoicing, so too will the restriction of document transmission over the network to just the invoice. Networks that only support an electronic invoice may get invoices to AP faster but they won't get invoices
through AP faster.
The real potential for transformation comes from the ability of a business network to support collaboration not only with the invoice, but also with related documents such as catalogs, contracts, purchase orders, order confirmations, change orders, service entry sheets, freight line items, advance ship notices, payment status, and payment remittance. Since most e-invoice networks only support the invoice document, however, the scope of interoperability will be restricted to invoice receipt. To send an electronic purchase order, process a service entry sheet, or receive an electronic shipping notice, you must engage multiple, distinct networks, or revert back to manual processing and the use of phone, fax, and email for status updates.
Today, business advantage comes from integrating e-sourcing, e-procurement, e-invoicing and early payment discount management in a single platform, across one business network. Ask your network provider what documents they
and their interoperability partners support. If they don't align with your P2P goals, that means more work for you and your suppliers.
Question 3 - Does the network support flexible data requirements, extensible data fields and multiple document formats?
Standards are often promoted as the great compromise toward interoperability; however, when they restrict capabilities, they can defeat a larger purpose. That is the case with e-invoicing standards that limit the fields you can apply for invoice processing. For many e-invoice networks, only the lowest common denominator is supported - limiting the invoice detail you receive, invoice matching potential, and ultimately straight-through invoice processing rate. To drive straight-through processing rates to 98 percent or higher, make sure your network provider and their interoperating partners support a full set of invoice fields and can add new fields upon request.
Question 4 - Can the network extend business collaboration for P2P transformation?
Business networks enable new processes and open up entirely new forms of collaboration that deliver value that can't be matched in a disconnected business environment. This includes "flipping" purchases order, contracts, and service entry sheets into invoices; delivery of real-time, electronic order confirmations and ship notices; and sliding-scale, dynamic discounting for collaborative cash management with trading partners. Failure of a business network to support these new capabilities will ultimately restrict your e-commerce potential.
Question 5 - Does the network offer a compelling value proposition to suppliers?
Sending an electronic invoice by itself delivers minimal value to suppliers and no supplier would pay fees solely for invoice delivery. Global business networks, however, open up new opportunities for collaboration and business process transformation for suppliers, including:
Delivery of e-catalogs to customers;
Generation of invoices from contracts and service entry sheets;
Viewing of invoice and payment status, and early payment opportunities, from a supplier portal;
Development of new business opportunities.
Networks that don't support these capabilities short-change your suppliers and your e-commerce initiative.
Question 6 - How does the network protect the security of my data? Over an interoperable network, your data is only as safe as the weakest network link. That places the burden on you to know what security standards each network supports. Certification as Payment Card Industry - Data Security Standards (PCI-DSS) compliant, Service Level-1 provider, is an example of a secure data standard that ensures the level of security a business network requires.
Equally important, you must know where your data resides, who owns the data and how the network will use it. Is your data stored on a server on someone's desk? Can your data be sold or used in some unauthorized way? These issues may pose problems for smaller network providers or those networks serving a small, narrowly focused niche.
Question 7 - How does the network ensure high performance and reliability?
When the scope of network coverage extends to tens or hundreds of networks, the burden will be on you to confirm the reliability and performance of these networks, and the different service levels you will get from them. You will be asked to understand which network is responsible if performance suffers or if things go wrong between networks. You may find that smaller, regional networks may not meet your requirements for global commerce or lack the resources to guarantee an acceptable level of network support and maintenance. If that's the case, you may want to exclude them from your interoperable network.
Question 8 - What happens if the network operator goes down or gets acquired?
As the market for business networks matures, you can expect consolidation as networks merge, larger networks acquire smaller networks, and some networks shut down operations. You must have a transition plan to keep e-invoicing operations in place when these changes occur.
Question 9 - Will the network support a consistent message to onboard suppliers?
When business commerce spans multiple networks, you may struggle to maintain control of a consistent on-boarding message to your suppliers across all regions, or ensure delivery of a strong message that compels action. Both are critical for supplier enablement success. Failure to monitor the message, in particular, can be damaging to your brand; when left unchecked, the message to suppliers can turn aggressive and unprofessional.
Question 10 - What business controls does the network have in place to eliminate legal risk?
Last but certainly not least is the need for proven business controls to eliminate business risk. Ensuring tax compliance and support for country-specific e-invoice regulations for companies doing business abroad are two critical components of any business network. Key capabilities include the ability to configure business rules at the country level and support for digital signatures. This latter feature is widely accepted by all tax authorities as proof of authenticity and integrity for e-invoicing. It places the compliance burden of proof on the tax authority, not you. This assurance can’t be underestimated; for if you learn that a business network you relied on lacked adequate controls a year after the fact, you may be liable for a year’s worth of taxes on your transactions, and the substantial penalties that go with them.
As you begin to explore network interoperability for e-invoicing, keep these ten questions in mind. By ensuring that all network providers in scope answer these questions to your satisfaction, you will have a solid foundation for e-invoicing across many business networks.
Richard Downs and Chris Rauen oversee marketing for the cloud-based financial solutions offered by Ariba, an SAP company
While the concepts of eProcurement and eSourcing are nearly two decades old, market adoption and real, meaningful usage of these solutions is still in a growth stage. In order to maximize the spend being negotiated and managed in the most effective manner, many companies - perhaps even your own company - are continuing to make strategic decisions about how to use eProcurement and eSourcing tools in conjunction with their ERP systems, catalog solutions and business networks. Join this session to hear how the team at Monsanto rapidly implemented their procure-to-pay and sourcing solutions, including integration with their ERP in order to gain maximum compliance and efficiency, and accelerate their journey to procurement excellence.
YOU WILL LEARN:
Best Practices For Organizations To Accelerate Their Journey To Procurement Excellence
How To Maximize Spend Under Management Through Effective Use Of Sourcing And Procure-To-Pay Solutions
How To Improve Contract Compliance To Prevent Savings Leakage And Mitigate Supply Chain Risk
How To Improve Process Collaboration And Efficiency Through Seamless Integration Of Business Networks To ERP Systems