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The advantages of electronic invoicing for accounts payable
Governments around the world continue to encourage digitization and push companies towards adopting financial technologies such as electronic invoicing, or e-invoicing.
A rapidly maturing area of fintech, e-invoicing is replacing paper-based methods as more organizations realize that not only is it far more efficient, but it also brings a wide variety of advantages for businesses that adopt it, and their trade partners.
What is an e-invoice?
An e-invoice is what it sounds like—an invoice that is created, exchanged, and processed digitally. It is the same in terms of content as a paper-based invoice and includes all the information you would expect to find there, such as billing information, tax numbers, and a breakdown of invoiced items.
An e-invoice is usually delivered electronically in a specified standardized format, enabling it to be automatically imported into a customer’s accounts payable system. Since both the sending and receiving systems use the same format, it is also possible for both systems to share and recognize data.
What is e-invoicing or electronic invoicing?
E-invoicing is the process of compiling and sending an e-invoice. It is an integrated process that enables a fully automated flow from one company’s system to another, replacing manual tasks with automated business rules and actions.
E-invoicing offers considerable advantages for both vendors and customers. Businesses supplying products and services can, for example, automatically generate e-invoices from sales transactions instead of having to create and print them manually.
Meanwhile, companies that receive e-invoices from their suppliers can automate labor-intensive processing steps, among other benefits. As a result, AP departments increase their efficiency, save on operational costs, and can ensure better compliance with applicable regulations.
Advantages of Electronic Invoicing
1. Cost Savings
Organizations can save huge amounts of time and money by eliminating paper-based invoicing and moving to a digital solution.
- Shred Paper Ties: Traditional paper invoices consume substantial resources in terms of paper, printing, postage, and storage, on top of the time required to do all this. By going digital, organizations can significantly reduce these costs.
- Decrease Labor Costs: A considerable amount of work is required for data entry and invoice processing when manual invoice processes are used. E-invoicing automates these tasks, freeing up staff for other important activities.
- Minimize Payment Penalties: Late payment penalties can be a significant financial burden for businesses. E-invoicing helps to ensure that invoices are processed and paid on time, reducing occurrences of late payment fees.
2. Efficiency Gains
Implementing e-invoicing as part of your accounts payable processes helps to boost autonomous invoice processing, significantly reducing processing times and minimizing the risk of errors and exceptions.
- Faster Processing Times: One of the biggest advantages of e-invoicing is the huge reduction in processing times it can offer. Unlike paper-based invoices that can sit forever in mailrooms or get lost in transit, e-invoices are delivered instantly.
- Reduce Data Entry Errors: Manual data entry often leads to mistakes in invoice details. This can be costly and cause significant delays. E-invoicing on the other hand automates data capture, reducing the risk of errors.
- Fight Fraud: E-invoicing enables better integration with your vendors. When receiving e-invoices, two accounting systems communicate with one another, limiting the potential for errors and invoice fraud.
3. Higher Accuracy
E-invoicing systems eliminate the need for manual data entry, and this helps to ensure that invoice details are accurately captured and transferred to accounting systems. This naturally improves the accuracy of invoices and helps to prevent unnecessary delays.
E-invoicing also allows for automatic matching and validations against three types of documents: PO, invoices, and GRN, which further improves the accuracy of your accounts payable function.
Finally, automated invoice validation and enrichment help ensure only correct transactional data enters your ERP system. Fewer discrepancies mean shorter cycle times and better business relations.
4. Enhanced Compliance
Accounts payable teams have a lot of rules and regulations that they must comply with. Unfortunately, it is all too easy to slip out of compliance, particularly when teams rely on outdated, manual processes. E-invoicing helps to ensure better compliance in a variety of ways.
- Audit Trails: E-invoicing systems maintain detailed audit trails, documenting every step of the invoicing process, helping to ensure that businesses can trace the history of each invoice for audit purposes.
- Record Keeping: E-invoices help AP departments maintain comprehensive records, making it easier to satisfy audit requirements and demonstrate compliance when necessary to regulators and auditors.
- Tax Regulations: E-invoicing can facilitate compliance with tax regulations by providing accurate and structured data that authorities can easily verify. This reduces the risk of tax-related issues and penalties.
5. Improved Relationships
E-invoicing helps to improve relationships with suppliers, customers, and other business partners through transparency, better cash flow management, and timely payments.
- Increased Transparency: E-invoicing can improve supplier relationships and satisfaction levels by reducing disputes and increasing transparency. A streamlined and automated invoice processing also helps capture deals and negotiate better payment terms.
- Better Cashflow: E-invoicing helps accounts payable departments to shorten payment cycles and improve cash flow for suppliers.
- Timely Payments: Automation and e-invoices ensure that invoices are sent promptly, thereby enabling them to be validated and settled much more quickly. As a result, you also establish a reputation as a reliable customer.
Electronic invoicing continues to be adopted on a wide scale and demonstrates beyond doubt that it is more than a trend. A pivotal shift in how businesses conduct financial transactions, e-invoicing is the new standard that must be embraced by organizations—in some cases, by law.
The use of software that supports e-invoicing can also bring several benefits to organizations, some of which we have discussed. These include reduced costs, decreased processing time, minimized manual tasks, mitigated fraud and compliance risks, improved vendor relationships, and the ability to better leverage data analytics.
Cevinio offers advanced software that simplifies invoice processing. We assist companies seeking streamlined global operations, monitoring and control tools, and best-in-class AI and ML solutions. If you are ready to lead the charge change of automation in your organization, get in touch today!