Benchmarking B2B e-invoicing & Payment Adoption

Transcription

1 Benchmarking B2B e-invoicing & Payment Adoption Balancing Buyer & Supplier Needs Agenda e-invoicing and Payment Adoption Background e-invoicing Motivations Representative e-invoicing Players Buyers Receiving Invoices: A/P Key e-invoicing Features for Buyers Modest Benefits Thus Far Suppliers Sending Invoices: A/R Key e-invoicing Features for Suppliers Preliminary Findings: A/R Survey Ripe for Change: Looking Ahead 3

2 Background BACKGROUND 4 Invoicing is just one component of the financial supply chain SUPPLIER BUYER Create Sales Order Create Purchase Order Receive Delivery Purchase Process Generate Invoice Invoice Delivery Invoice Receipt Match & Reconcile Approve to Pay Invoice Process Receive & Deposit Payment Apply Payment & Reconcile Pay Payment Process 5

3 e-invoicing: Motivations Supplier: Accounts Receivable In large companies, billing is handled by a separate system (or many separate systems), lots of complexity Eager to avoid cost of mailing invoices Efficient and accurate invoicing facilitates working capital management and effectiveness of cash flow forecasts As buyers extend payment terms Supplier has to hoard cash Reliance on expensive funding sources (factoring, asset based lending) e-invoicing attractive if it facilitates early pay discounts, dynamic discounting Buyer: Accounts Payable Accelerate processing of incoming invoices Electronic receipt reduces processing time, increasing likelihood of achieving current early payment discounts and negotiating new early pay discount opportunities Paper invoices (often only entered into A/P at summary level) inhibit spend management Visibility to spending patterns Ability to enforce supplier contracts Reduce inquiries from suppliers Where s my payment? 6 Representative e-invoicing Players SUPPLIER Generate Invoice Invoice Delivery Invoice Receipt/ Scan Match & Reconcile Approve to Pay BUYER Manual Manual SP/SMB Distinctions by size of business increasingly blurry Mid-market ReceivePay Bank einvoicing Web 2.0 / SaaS Solutions QuickBooks, Dynamics Transcepta Transactis EBIDS Incumbents: Sage, etc. SaaS Solutions: NetSuite Bill.com EIPP: Bottomline, Enterprise Enterprise Billing Systems ERP: SAP, Oracle Procurement: Ariba 7

4 Invoices by Size of Business, U.S. Supplier (A/R) Invoices & Bills Created (billions), Enterprise Mid-Market SMB SP 44.9 Total Total None Number of Employees 1.1 million thousand thousand 1.1 million 2.2 million 6.9 million 32.8 million million Average revenue per business Source: US Census (2007), Glenbrook Analysis 8 Survey Methodology AP: Buyer Perspective Survey Conducted June responses were received from the IAPP, IARP, and TAWPI membership Sponsored by Basware Report published November 2010 AR: Supplier Perspective Survey March-April 2011 (In progress!) In depth interviews May-June 2011 Report pending 9

5 Buyer Perspective BUYERS 10 Procure to Pay Process Flow Procurement AP Supply Chain Vendor Master Identify Need to Buy Generate PO Approve PO G/L Three Way Match Place Order Receive Goods Receive Shipping Manifest Receive Invoice PO Shipping Manifest Three Way Match Reconcile Initiate Payment Deliver Remittance Invoice Post AP Monitor Supplier 11

6 e-invoicing: Key Features for Buyers Buyer = Accounts Payable Paper invoice SCANNING Invoices received as paper must be scanned Electronic invoice RECEIPT PDF Fax (either as attachment or in body of ) EDI XML Optical Character Recognition (OCR) OCR applied to scanned images, PDF to determine vendor, invoice number, amount, PO number, and (optionally) item level details File storage for related business documents (contracts, estimates, delivery receipts, etc.) Workflow for approval routing Integration Accounting A/P & G/L Procurement 12 Businesses face a long tail of suppliers The middle tier is stubbornly reliant on paper checks High volume, high frequency EDI document exchange + EFT or wire payment for most important trading partners. Exchange orders, invoices, and payment data. Regular Suppliers Occasional Suppliers Dominated by paper checks mailed to large & small suppliers that are not willing/able to accept ACH payment or manage multiple invoicing processes. Large enterprises push P-Cards for smaller value purchases and one time purchases; otherwise paper checks dominate. Try to persuade small suppliers to , fax, or upload/key invoices into website. One-Time Suppliers ~100 1,000s 10,000s # Suppliers 13

7 AP Automation Solutions Deliver a Range of Benefits Increasing benefits Manual invoice processing and data entry Back-end (after invoice processing) imaging for archival purposes Front-end scanning with manual data entry of invoice data Automated workflow for invoice review and approval Front-end scanning with character recognition to aid data entry Automated workflow for invoice review and approval Front-end scanning with character recognition to aid data entry Automated invoice matching to PO data for approval Automated payment scheduling Automated workflow for exception invoice review and approval Increasing technical sophistication 14 Manual Processing is still Prevalent Note that the IAAP members that we surveyed are probably more advanced that the A/P population at large. 25.7% 16.6% Identify the level of automation in your invoice receipt process. 57.7% Manual data capture and approval process Automated invoice data capture, manual entry to system of record Automated invoice data capture, automated entry to system of record 15

8 Most Invoices Received via Mail Buyers (A/P): How many of your incoming invoices are e-invoices? 100% 90% More than 61% 80% 70% 41% to 60% 60% 50% 40% 30% 20% 10% 20% to 40% Less than 20% 0% 0% ,000 Over 2,000 N/A Number of Employees Source: TAWPI / Glenbrook Analysis 16 e-invoicing in Many Forms Buyer (A/P): In which format were e-invoices received? (Check all that apply) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% ,000 Over 2,000 N/A Number of Employees Scanning or workflow software File upload PO flip (invoices electronically generated from purchase orders) Electronic data interchange Source: TAWPI / Glenbrook Analysis 17

9 Not all e-invoicing Forms are Equally Desirable e-invoice does not necessarily imply efficiency The vast majority of invoices are still handled manually by A/P in all but the largest companies Only PO Flip and EDI enable the buyer to automatically absorb invoice data into A/P and process for payment All other formats involve additional handling and expense: PDF or Excel/Word invoices delivered via must be forwarded / loaded into workflow system (large enterprise) or manually keyed into A/P (most other businesses) PDF or Excel/Word invoices that are uploaded via web application are subject to character recognition (large enterprise) in order to parse data Scanning relies on a third party or licensed solution to convert invoices received via USPS to PDF images for character recognition and workflow 18 Maturity of AP e-invoicing Programs E-Invoicing Penetration Modest Even Among Early Adopters How long ago did your organization begin receiving e-invoices? Longer 10 years ago 6-9 years ago 3-5 years ago 2 years ago 0% Less than 20% 20% to 40% 41% to 60% More than 61% Last year 19

10 AP Rationale for e-invoicing How important has each of the following reasons for e-invoicing been to your organization? Improves processes Improves accuracy Lowers cost per invoice Eliminates paper Speeds up transactions Enables proper accounting at month-end Improves relations with suppliers Has environmental benefits Very important Somewhat important Not important Don't know Allows for globalization 20 Benefits by Length of AP e-invoicing Program Percentage of companies that reported they had benefited "very much" from e-invoicing 73% 82% 80% 78% 45% 56% Last year 2 years ago 3-5 years ago 6-9 years ago 10 years ago Longer How long did your organization begin receiving e-invoices? 21

11 AP Benefits by Industry Percentage of companies per industry that reported they had benefited very much from e-invoicing Media Agriculture Professional Services Education Services Utility Construction Chemicals Automotive Manufacturing Public Sector Healthcare Transportation Pharmaceutical Wholesale Trade Retail Lodging/Dining Financial Services Telcom 0% 0% 33% 43% 47% 50% 50% 50% 50% 56% 58% 64% 67% 75% 75% 86% 86% 90% 100% 22 Plans to Increase e-invoice Volume Do you have plans to increase the number of e-invoices in your organization? 4.7% 11.6% Yes 23.3% 60.5% Maybe No Not sure/not applicable 23

12 But no consensus on how to increase What are the best ways for you to increase the proportion of electronic invoices? Including e-invoicing requirements in new or renewed contracts 49.7% Letting our suppliers know that we no longer accept paper invoices 42.4% Internal investments in technology (software or hardware) 41.2% Having an e-invoicing provider contact suppliers on our behalf and empowering them to send e-invoices 30.9% Banks taking an active role in promoting e-invoicing 13.3% Legislation / government regulation 4.8% News reports in the media 3.0% Respondents were instructed to check all methods that they perceived to be effective. 24 Large Businesses Want e-invoicing Suppliers don t have the capabilities Buyer A/P: What are the biggest obstacles to increasing the share of e-invoices [received]? Insufficient Resistance business from suppliers system capabilities on our part or with our suppliers Insufficient funding Learning curve that needs to be overcome Lack of management support Lack of understanding of the P2P process Resistance from internal customers Resistance from AP team Source: TAWPI (unpublished), Glenbrook Analysis 25

13 Supplier Reaction: Indifferent What reaction have you received from the majority of your suppliers? 3% 13% Very favorable 35% Somewhat favorable Neutral 49% Negative 26 Supplier Perspective SUPPLIERS 27

14 einvoicing: Key Features for Suppliers Supplier = Accounts Receivable Invoice CREATION Estimates Item/catalog management Templates that support services or goods, templates for various industries, templates for recurring invoices Expense tracking Time tracking Multi currency; multi-language Tax calculations Automate calculation of discounts and or late fees Custom templates that reflect company branding (logo, color scheme, font) Invoice DELIVERY Outsource USPS mailing Fax PDF (as attachment) link to view invoice online or download PDF AVOID duplicate data entry (e.g. into supplier portal) Integration CRM client contacts Accounting A/R & G/L Follow Up Reminders Reporting 28 Invoice Creation Does not happen in isolation: requires accurate data Customer Data Efficient invoice creation accelerates cash flow Inventory/Availability Pricing Expenses/Materials Terms Discounts Invoice accuracy is key to on time payment 29

15 Requirements Driven by Nature of Business Selling Goods Sale and invoice happen at different times (cannot invoice until goods are shipped) Manage discrepancies between quantity ordered and quantity received Variable pricing (e.g. volume discounts) Tax Aggregate frequent invoices in monthly or quarterly statements Selling Services Project or time and materials Track hours or days by client and/ or project Organize and track expenses by client and/or project Manage subcontractors and bill their time/expenses with or without a mark-up Variable pricing by service or by line of business 30 AR Responses Thus Far PRELIMINARY RESULTS Selling to businesses or a mix of consumers and businesses (excluded respondents that sell only to consumers) Responses thus far from relatively small companies (less than 1000 invoices per year) with a smattering of larger companies (50-250,000 year) They ve been sending e-invoices for awhile, majority for 2-5 years. 60% claim no correlation between e-invoicing and receipt of electronic payments 20% claim buyer less likely to pay electronically if invoice is delivered electronically Obstacles to increased electronic invoicing include insufficient funding, lack of understanding of the order-to-cash process 31

16 Supplier e-invoicing PRELIMINARY RESULTS Relatively high number of electronic invoices Two thirds deliver more than 60% of invoices electronically One-fifth send NO electronic invoices Most delivered via Fax Most created using accounting software A few created manually (via Word or Excel) Over 60% claim that invoice creation and delivery are both automated. 32 e-invoicing Benefits PRELIMINARY RESULTS A/R: How much has your organization benefited from each of the following as a result of electronic invoicing? Improved processes Elimination of printing and mailing effort (and associated cost) Improved relations with customers Environmental benefits Generate invoices more quickly Reduction of credit and collections effort Improved cash flow management (receive payment faster) Improved audit and compliance Very much Somewhat Not at all Increased centralization Enhanced ability to offer early pay discounts and accelerate Greater invoice accuracy Improved employee morale with AR and collections 33

17 B2B Networks Are Buyer-Centric Challenge is to reach as many suppliers as possible The largest networks have no more than 600 buyer customers and 500,000 suppliers Yet there are 26 million businesses in the US alone Need features that make it attractive and easy for suppliers to participate Glenbrook Partners, 2011 Transaction Value ($ billions) Note: log scale Bubble Size = Number of Suppliers B2B Supplier Networks Direct Insight 60,000 Bottomline 100,000 ADP P2P 14,000 Buyers Citi Procure to Pay 185,000 OB10 60,000 Syncada (PowerTrack) JPMorgan 470,000 20,000 Ariba 185,000 ipayables 45, Source: Paystream (2009) 34 Supplier Reaction to B2B Networks Add complexity to supplier s business processes Standard invoicing & payment process. BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER SUPPLIER Non-standard, exception processes for supplier B2B Network B B2B Network A BUYER BUYER BUYER Exception processes only tolerated for large, strategic buyers. Alternatives must be convenient and add real supplier value in order to overcome status quo. Glenbrook Partners, 2011 Buyer s Own Portal B2B Network C BUYER BUYER 35

18 e-invoicing in Europe: it works better Significant Variation by Country Over All Poland Slovakia Sweden Czech Republic Norway Romania Russia Hungary Lithuania Latvia Finland Austria Germany Denmark Estonia United Kingdom RECEIVING SENDING Source: Itella 2010, Glenbrook Analysis 36 Summary & Looking Ahead SUMMARY AND LOOKING AHEAD 37

19 Invoice Delivery is Independent of Creation An entire industry has been created to enable buyers (A/P) to electronify paper invoices that suppliers send via mail Seller Mails Paper Invoice Buyer A/P Workflow Solution 70-80% of B2B invoices are delivered via mail 38 Electronic delivery may meet supplier needs, but not satisfy buyer s A/P needs EDI/EFT meets needs or large buyers and suppliers, but what about others? Supplier If not mailed, more likely than not delivered as PDF via Or a link to website where invoice detail can be viewed or PDF downloaded Buyer Small buyer must print and re-key information into A/P (or have bookkeeper do it for them) Large buyer must apply character recognition in order to read and extract data for matching against Purchase Order and proof of delivery Challenge: Efficient, cost effective delivery Opportunity: utility that feeds A/P solutions Challenge: Ability to extract meaningful invoice data 39

20 Looking Ahead Glenbrook Perspective Our industry has historically been focused on buyers. It is encouraging that there are a number of supplier-centric e-invoicing solutions gaining traction today (although the are disproportionately focused on SMB). Need middleware to knit together existing buyer and supplier-centric solutions. Businesses are wed to their processes and unlikely to change them why continue to try to coax them? As small businesses continue to struggle for credit, early payment discounts and dynamic discounting may offer compelling reasons for suppliers to streamline invoicing in order to accelerate payment. 40 Mark Brousseau VP Research & Business Development IAPP-IARP-TAWPI m_brousseau@msn.com (717) Erin McCune Partner Glenbrook Partners, LLC erin@glenbrook.com (415) Contact Erin or Mark directly with additional questions Send an to erin@glenbrook.com to request a copy of these slides.