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We keep hearing about e-Invoicing interoperability. Where is it?

It’s no surprise that as more third-party e-invoicing networks offer suppliers the dream of efficient and affordable electronic invoice submission, those customers find themselves connecting to multiple networks. Is this what suppliers signed up for as solution providers painted pictures of cost savings, faster payment, and a world where invoicing customers was the least of their problems? Not exactly. The piece that’s missing from this utopia is interoperability.

The term interoperability is defined by both Merriam-Webster and Wikipedia as follows:

The ability of a system to work with or use the parts or equipment of another system.

Merriam-Webster

A characteristic of a product or system, whose interfaces are completely understood, to work with other products or systems, at present or in the future, in either implementation or access, without any restrictions.

Wikipedia

Does the current state of electronic invoicing, at least as it pertains to suppliers, mirror either of the above definitions? Most suppliers would answer with an emphatic NO!

What the data tells us

According to our 2021 Perceptions Analytics study on electronic invoicing, most suppliers are not connecting to multiple customers through a single electronic invoicing network or a single interface. They’re connecting to 10, 20, or more customers using various networks.

While it’s excellent that suppliers are submitting electronic invoices at an increasing rate, that rate tends to be painfully slow. Unlike other technologies, such as the Internet, social media platforms, mobile technologies, and various forms of electronic payment, electronic invoicing is growing in spite of itself. One of the main culprits keeping electronic invoicing from reaching ubiquity is the lack of interoperability.

“Adoption isn’t speeding up as the market matures. This is due to most companies taking the antiquated approach of needing buyers and suppliers on the same network or solution to trade, says Erik Modh, VP North America with Pagero, the world’s largest open B2B network. “There are thousands of possible solutions out there. If we are to accelerate this market again, the legacy networks need to interoperate.”

Indeed, the industry is screaming for change. No other technology with a history of rapid advancement requires both parties to connect outside of a fair and reciprocal environment.

Interoperability creates an open, fair, and competitive market for digital trade,” Modh continues. “You choose your provider based on merit, make one connection into them, and they connect to all your customers, regardless of what solution they have chosen. Think cell phone networks in the age of mobile communications. If you sign with one service provider, you have access to everyone that has a phone number, regardless of who their provider is.”

Other challenges remain

Another challenge with electronic invoicing is the rate of errors, or exceptions, experienced by suppliers upon onboarding. We mentioned in an earlier blog that suppliers participating in our study indicated they were experiencing a relatively large number of errors and exceptions after they were onboarded to their respective electronic Invoicing network. Multiply that by several solution providers, and you’ve got a severe issue with paper pain points being replaced by onboarding pain points.

This problem leads to the ultimate question: where is interoperability? There have been promises of allowing multiple electronic invoicing networks through a single interface for the last 10 to 15 years. In many cases, at least in terms of the progress being made by individual networks, we are no closer than we were at the beginning of the previous decade.

“Interoperability removes the need to connect every buyer-supplier relationship with an IT project, countless subscriptions, and solutions to manage,” Modh points out. “That’s additional cost unnecessarily folded into the supply chain. This isn’t just a supplier problem. Buyers are paying the price for lack of interoperability as well.”

Several networks have attempted to introduce their version of interoperability, but it works only if you use their network and partners. Is that true interoperability? Not exactly. A primary driver is the competitive nature of electronic invoicing networks. Why would company A try to make life easier for company B.? True interoperability facilitates the use of multiple networks with a single interface. Simply put, we’re not there yet.

Modh emphasizes that legacy networks are too focused on preserving existing business that the old model provides – especially as they see the industry slowing down. “This is real short-term thinking,” Modh adds. “If they opened up, performed interoperation properly, that would make e-Invoicing accessible for all and open untapped markets worth many times more than the business they’re currently trying to defend.”

There is hope. In Europe, interoperation is becoming the norm. The results can’t be ignored, including time to value, savings, and high e-document penetration rates currently being achieved. Like anything, this will be driven by customer demand. Both buyers and suppliers must appreciate the value and cost-saving of choosing a solution to achieve seamless interoperation.

Perhaps true interoperability is in our near future, either with a consolidation of several independent electronic invoicing networks or a third-party solution that provides a true, single-user interface for all networks. Ultimately, time and customer preference will tell the whole story in the end.

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 currently chairs 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.

Pagero is building the world’s largest, open business network – so you can reach any business, anywhere in the world. No matter how many borders your operations may cross or how many systems you are connected to, we take care of the technical and regulatory requirements across your entire order-to-cash, purchase-to-pay and freight processes. We give you data accuracy and security, transparency and real-time visibility – through a single connection.

 

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