The Invoice Efficiency Gap

How to free up more time for skilled invoice professionals.

One of the biggest generators of documents in large organisations is accounts payable and accounts receivable. The vast majority of these financial communications are still produced on paper and the cost of processing them is considerable.

Cost is not the only issue. Lack of automation around these paper processes means that skilled finance professionals are often spending their time on administrative tasks rather than adding value at a strategic level. Inefficiencies in this business-critical function have a knock-on effect that can impact the business at every level. Put simply, delays to payment processing can affect cash-flow, which is why invoice processing automation is becoming a board-level discussion.

Pitney Bowes customer studies have shown that the typical processing cost of €13 per invoice (in a medium/larger firm) can be reduced to something around €6.50 per invoice through digitisation and data extraction at point of receipt.  On this basis, and also taking into account the existing level of e-invoicing penetration in different European countries, potential savings from incoming invoice digitisation and data extraction of B2B invoices, in particular those inbound invoices paid by medium and larger firms (over 100 employees) have been calculated. These figures show that European businesses could reduce the cost of invoice processing by almost €30 billion each year. In the UK alone, the figure is €5.50bn.

Many commentators have heralded a wholesale move to e-invoicing as the solution that makes invoice processing more efficient.  This is undoubtedly true in theory, with typical cost savings in the region of 70% or more through the adoption of e-invoicing.  However, the additional costs to the millions of smaller companies of providing data and enrolment into eInvoice networks is substantial.  This might explain why, although it has experienced steady growth, e-invoicing has still only captured less than 10% of the total volume of European invoices.

Multiple document, data and channels are here to stay; the challenge for organisations across Europe is to develop a migration path that can handle a wide variety of formats, can give the enterprise a single window into the finance function, and can deliver much-needed financial efficiencies in the short-term, without the need for capital investment. Realistically, outside of highly controlled supply chains, there will continue to be a high volume of paper invoices produced and processed.

Hybrid systems – those able to manage both paper and digital workflows - now hold the key to overcoming this multi-format, multi-channel hurdle. These solutions can process the various incoming and outgoing invoices by combining data from all streams (whether paper-based, or digital) into a ‘decision-ready’ format. By this method, standard activity is automated and only exceptions require human intervention meaning that companies can speed up processes and improve efficiency.  Hybrid solutions enable users to keep customers and suppliers happy, providing them with the option of migrating to digital usage when the time is right. By using a hybrid solution, organisations can ensure that implementation costs for the network remain low and actually benefit the smaller players.

As well as cost savings, automation also offers additional benefits, including the opportunity to benefit from early payment discounts. In addition, research from PricewaterhouseCoopers shows that almost a third of organisations identified ‘fewer disputes’ as a benefit of automated invoice processing. There are also important compliance considerations here.  If records are not being digitised and are only kept in paper form, the risk of loss or damage could harm organisational compliance.

The road to eventual e-invoicing is in fact one that can be taken in gradual stages.  Organisations need to ensure that they have systems that can cope with both paper and electronic formats if they are to manage the transition to digital as the market pace of change happens. For many, adopting an outsourced hybrid solution will be the most efficient and cost effective way to achieve invoice processing automation and to reap the benefits of such efficiency across the entire organisation.