By Ilija Ugrinic, commercial director at Proactis
The Covid-19 crisis has caused ripple effects across all organisational operations – and Accounts Payable (AP) is no different. The global pandemic has seen offices shut down and swathes of the population adapt to a new world of working from home full time.
This change has proved particularly challenging for finance functions, which are used to having access to documents and handling processes both physically and electronically.
One major challenge is the ability to process invoices effectively and efficiently, which is a particularly alarming thought given that right now, the supply-chain is an even more critical factor for safeguarding the financial stability organisations.
With AP teams now working remotely, it is unearthing issues that are leading some to call for the end of paper invoicing altogether, in favour of a complete adoption of electronic invoicing. This is being driven by the sudden realisation by buyers that nobody is on-hand to deal with paper invoices reaching offices, exposing a lack of agility in the process. To put it in to context, of the six million invoices processed through Proactis’ technology each year, 30 per cent of those are paper invoices.
Electronic invoicing (or e-invoicing) is a broadly used term and can mean different things to different people. One could argue that any invoice submitted via an electronic channel is an ‘e-invoice’, including scanned invoices sent by email as PDF images. However, in this instance, that would rely on OCR or manual extraction. A truly electronic invoice is structured invoice data issued in XML format, created using PO flip or directly entered via a portal, meaning the requirement for manual verification and checking is eliminated. And that leads to a second challenge. Although better than paper for remote working, a switch to PDF invoices, be it data layered or just an image, does not solve the problem facing the AP team today. Not least when around 70 per cent of the invoices processed by Proactis each year are in PDF format.
Many who are at home trying to manually process PDF invoices which are received via email, are dealing with two core issues. First, streamlining the process of which a team member handles each invoice and detaches the PDF from the email, storing it centrally ready for processing. Second is not having multiple screens to work on and needing to continually move between a PDF and the finance system, or another system such as important timesheet information from HR, in order to key in and check the data. This not only slows the process down but increases the likelihood of human error.
There are the obvious reasons for going paperless. For many it is simply the right thing to do. Admittedly, it is tempting to try and turn to pure e-invoicing, whether it is XML or portal invoices. It by-passes manual validation and data checking and has the evident benefit of saving on paper, being more socially responsible and beneficial to the environment. But is it realistic to suddenly expect all suppliers with shortages in the necessary skills, capacity, and budget to want, or be able, to switch in both the short and long term? Also, the supplier has the challenge of then changing a common process they have in place for sending invoices to all of their customers, to then going to a specific portal for one customer – which seems unfair especially in these times.
The question invites debate on the issue, because many do not think it is realistic to assume that paper and PDF invoices will disappear in the short to medium term. Experience shows us that some smaller suppliers simply don’t all have the skill or time to produce an XML or portal invoice and still rely on paper or a PDF – and they tend to spend most of their energy on delivering their core goods and services.
This means the argument for 100 per cent e-invoicing deteriorates under closer scrutiny. Paperless invoicing should be encouraged where possible, and it might be the answer for us all one day, but that time is certainly not now. The lockdown may well have forced many businesses to recognise inadequacies in their own AP systems, but these will need to be addressed once life according to the new norm has settled down. Right now, their focus is not on adopting a new processing system but on ensuring they have the capacity, technology and resources to safely navigate their way through the unfamiliar method of working that Covid 19 has thrust upon them.
Perhaps the goal should not be to make all invoicing electronic from its source, but rather make all invoices, regardless of source, into one efficient and accurate file of invoices that they buyers’ system can process and pay.
It does not mean that finance departments need to immediately replace everything they do – the last thing smaller businesses need right now is to feel pressured in to implementing electronic processes at a time when their energy and focus is needed on its core business. Instead, if the objective is to pay suppliers on time or early, capture solutions that enable paper and PDF invoices to be processed with the upmost efficiency should be adopted.
We have already seen an agile approach already reap tangible rewards for several companies. Screwfix, for example, now save over £100,000 annually, P&O Ferrymasters has reduced invoice processing costs by over 35 per cent, while Bauer Media reduced AP costs by 66 per cent.
In 1988, the UK postal workers strike proved to be pivotal in the way procurement and finance teams operated. With paper requisitions grinding to a halt, a new way of operating was born as the age of the fax machine began. Over thirty years on, the UK (and indeed the entire world) is faced with a new challenge. It might be different in nature, but once again it is accelerating the quick adoption of a new approach and with it, the full ignition of remote working.
If organisations can help willing suppliers make the transition to e-invoicing, then it is a great goal to have. But Covid-19 hasn’t exposed the need to end paper invoicing, rather the need for an agile and flexible model – one which can efficiently handle paper, data-layer and image-based pdfs, XML and portal invoices, regardless of how the team is set up. Suppliers large and small alike can then focus on delivering the best – and most efficient – service they can.