Why Do We Still Confuse the Rudimentary Aspects of e-Invoicing?

I recently read an article in The Windows Club titled What is E-invoicing? Is it any better than traditional invoicing? In this article, author Anand Khanse, owner of The Windows Club, touched on e-Invoicing’s ability to facilitate digital transformation, speed payments and positively impact the environment. While Khanse is not an Order-to-Cash specialist, he does a decent job of expounding on the virtues of e-Invoicing at a 30,000-foot level. The issue in this article is not his appreciation of e-Invoicing. The issue is his mixing of capabilities when discussing e-Invoicing and digital invoicing. He correctly indicates that the two forms of invoicing are not the same, describing e-Invoicing as being able to send an invoice directly to the buyer’s software. Khanse goes on to identify two examples of e-Invoicing, which are not true e-Invoicing solutions at all.  They are closer to digital invoicing solutions blended with some automation.

I decided to write about this issue because after 20 years, we still don’t understand what true e-Invoicing really is. Several invoicing solution providers, as well as many that write about the topic, sully the issue by not properly defining true e-Invoicing. Furthermore, many identify digital and automated solutions as true e-Invoicing when they are not.

I wrote an article three years ago titled What is Electronic Invoicing, Why Should Suppliers Care and Who Are the Major Players? In it, I discuss how the industry continues to misrepresent true electronic invoicing and how that ultimately doesn’t benefit businesses (especially small to mid-size companies) interested in understanding and utilizing e-Invoicing solutions.

To recap what I wrote back then, true electronic invoicing enables straight-through processing. The invoice is delivered directly into the customer’s accounts payable system with zero data entry or manual intervention. Also, once those invoices are delivered, they enter a 2- or 3-way matching process that then prepares the invoice for payment by the customer. The key here is no manual intervention on the customer’s part. The examples of e-Invoicing provided by Khanse will likely require some intervention on the part of the customer, so neither are true examples of e-Invoicing.

When will e-Invoicing truly be understood?

As I mentioned above, it’s been more than 20 years since the advent of electronic invoicing. Unlike other technologies, such as the Internet, network-enabled mobile phone service and even artificial intelligence, e-Invoicing appears to still be meandering through the industry looking for definition and accuracy.  Organizations such as the Business Payments Coalition have done a great job in working toward solutions for the country’s overall payments solution, including the electronic invoicing component. Their definition, like ours, indicates that true e-Invoicing can be defined as:

An invoice that has been issued by the seller, transmitted and received by the buyer in a structured digital format which allows for automated processing.

It is the automated portion of this process, where no manual intervention is involved, that defines true electronic invoicing. The definition can be found in the document published by the Federal Reserve Bank of Minneapolis: Catalog of Electronic Invoice Technical Standards in the U.S.

The only way true e-Invoicing will be understood is if the industry – buyers and sellers – commit to properly identifying true electronic invoicing. While automation and digital implementation are good, not all of it is true electronic invoicing. Let’s agree to finally get on the same page and understand what true electronic invoicing actually is.

Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. He previously chaired the Vendor Forum of the Federal Reserve Bank of Minneapolis and his resume includes time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific, as well as a number of years as an independent consultant.