Australia has witnessed a lot of discussion of the brave new world of Government 2.0, but there has been little attention paid to the real benefits of introducing electronic invoicing by government suppliers.

The situation in Australia is similar to the US, where the business benefits of AP automation and digital workflow are driving uptake, but there is no obligation on government suppliers to deliver invoices digitally. In Europe, the government is the main driver, and this is also the situation in Singapore where electronic invoicing was mandated from May 2008.

There is no federal initiative for electronic invoicing in Australia, according to spokesperson from the Department of Finance and Deregulation.

“The decision to use electronic invoicing is not made centrally or as a matter of policy, but is subject to decisions by individual agencies. Such decisions would be made on the basis of whether the process provides value for money relative to the available and practical alternatives, noting that improved service delivery is a focus for government.” said the spokesperson.

The Department of Broadband, Communications and the Digital Economy is investigating the use of electronic invoicing, Credit Card usage and undertaking payments more seamlessly.

The current procure to pay system links SAP from the Website, including the registering of the Spending Proposal, obtaining online approvals, the linkage between the document creation software and the Contracts Management software and the distribution of documents via IMS. The Goods receipting is linked to the Purchase Orders.

Phase 2 is to automate the current manual linkage between SAP and the Contracts Management software therefore finalising the end to end functionality.

“It is extremely important to know fully what you are trying to achieve," said Michael Honan, Manager Procurement & Funding Agreement.

"Your current system and processes are something that may have been developed over sometimes many years and would have been informed by the requirements (of the business) at the time of their initial development. Your exposure to these systems can in many cases bias your view to future directions, opportunities or outcome needs. At some point, your organisation should review its needs. This may well be that a decision to automate P2P is as a result of recognising that the “internal cost of doing business” is not appropriate or balanced. This point in time is an opportune time to review the business needs and your decisions regarding the degree of automation should be decided at this point.

"Not to undertake this review may result in simply automating/computerising a current process with no additional value add. For example, we decide to go to a paperless office, so do we change to receiving an invoice via a PDF? Or is the some way to have the invoice submitted directly to your Financial Management Information System (FMIS) with a built-in workflow providing appropriate approvals.

"Can required payments be paid against a Credit Card (i.e. telecommunications Billing) as they fall due and tools such as ProMaster used to acquit as required. Can Bpay, given the new work in this area around addressing, be used to eliminate some of the risk around Credit Card details floating around?

"It is central to good financial reporting that the initial Business need, Registration, contract development, goods receipting and payment process are all aligned with quality data that accurately reflects the arrangement.

A centralised and automated P2P function can ensure that appropriate skill sets are applied to this function. Training, issues management etc can be applied on a more focused level with a centralised team.

Sydney's Lane Cove Council went live in July with an inhouse developed Invoicing Workflow System using Outback Imaging's EzeScan software.

"We designed the logic and workflow and queries to our AP and Purchasing System. We are discussing with our AP/Purchasing software provider to integrate it fully with their system, all the way to cheque printing," said IT Manager Caroline Hodkinson.

The council now scans all paper invoices and process them using this system which also allocates the invoice to the correct officer for payment approval.

"We have seen immediate benefits with this paperless system," said Hodkinson

"We had also looked at purchasing such an invoice automation system but the cost was not something within our budget.

"I can see benefit in requiring all suppliers to invoice us electronically, but I cannot see that happening because some of our suppliers are small."

There are a number of different approaches that government bodies can take to deal with the problem of paper invoicing.

One approach is to implement an in-house accounts payable automation system. This involves the installation of dedicated scanners or MFDs that take an image of the paper invoice and extract the relevant data for direct input into the organisations financials system and/or a workflow application (to enable non purchase order invoices to be approved).

There are many examples of government bodies in Australia and New Zealand that have implemented solutions from ReadSoft (RTA), Basware (South Australian Government), EzeScan, TIS (Gold Coast City Council), etc.

A NSW shared services government agency recently announced the purchase of a US$800,000 solution from ReadSoft that initially covers the processing of more than 300,000 invoices annually. NSW Businesslink offers a wide range of corporate services including HR, payroll, procurement and accounts payable, to other government agencies.

An alternative approach is to engage a Business Process Outsourcing (BPO) organisation to manage the full process for you. In this scenario, the paper invoices will be directed to a dedicated PO Box and from there the BPO will take over the scanning and data extraction, delivering the document image and in some cases the business data directly to the government body's financial system or a workflow application.
However, both the above scenarios still involve the use of data capture applications to extract data from the paper-based invoices. Some view this as a short term approach to improving the nature of the relationships that governments (and corporate) want to have with their suppliers.

For Government agencies, BPO services where invoices are processed overseas in China, India or the Philippines might be an issue in terms of confidentiality and security.

“In our discussions with customers, we are encouraging them to evaluate solutions that help transition suppliers towards sending their invoices electronically – either via web-based application or using standardised formats such as EDI or XML. Together with the ability for these suppliers to “self serve” and check the status of invoices using a web browser, this means the volume of enquiries coming into accounts payable departments are reduced significantly. This provides significant benefits for all parties involved in the process of sending, receiving and approving invoices” said Gordon irons Managing Director, Leap IT Solutions.
There are many reasons for a government body to eliminate paper invoicing entirely, the first priority being to remove most of the manual activities related to processing paper invoices.

In addition to the instant savings derived from removing and automating manual processes, there are benefits realised in cash flow ,and improvements to working capital management.

The tide is turning globally for electronic invoicing to government, according to Karri Lehtonen, vice-president for Basware Australia and New Zealand.

"Many European governments are not accepting paper invoices from suppliers any more," said Lehtonen.

This means that the state will simply not accept a paper invoice anymore from its suppliers. All invoices that are delivered to the government must be only in electronic format to be paid by the government.

Denmark was the first European country to mandate electronic invoicing in 2005, followed by Sweden and Italy in 2008 and more recently Basware's home country of Finland in 2010.

Finland's single shared services centre provides centralised AP handling to 64 different accounting units in government, including Defence, the Police forces and Border security. Last year it processed almost two million invoices.
The shift to all-electronic invoice processing at the Finnish state SSC delivered faster invoice handling times and reduced error count with the benefits of improved contract and PO matching.

"Norway is also moving to enforce e-invoicing as well starting from July 1, 2011," said Lehtonen.

"The absolute deadline for suppliers of the Norwegian state is (northern) Summer 2012 to submit e-invoices."

Billentis, an independent European E-Invoicing consultant and market analyst, estimates overall penetration of e-invoicing in Europe varies between 4-15% and in USA around 4%. In APAC these figures are even lower.

In a less mature e-invoicing market, such as the ANZ region, the buildup of real electronic invoice volumes may take a long time. To tackle this issue Basware has an all-in one service solution, Basware Connectivity, that enables buyers to receive all their purchase invoices fully electronically from day one.

"The inhouse scanning and BPO model are "traditional" or the "old" ways of handling invoice data entry into an organisation's financial system, using OCR to avoid manual keying in of invoice data," said Lehtonen.
"In Europe, private and public sector organisations are, however, looking beyond this point trying to avoid the need for any separate data extraction systems altogether. Organisations are now pushing the onus of invoice data entry from the buyer to the suppliers by demanding the supplier send their invoicing data electronically so that the data can be automatically received by the buyers financial system, without any human intervention."

"Electronic invoicing is the "new" way of tackling the challenges of invoice data entry."

Introduced in Australia in 2009, Basware Connectivity is a dedicated electronic document and message exchange that has been operating for over 10 years in Europe. It provides the customer with a portal, hosted by Basware, that suppliers can interface with via the Web. For those suppliers that cannot make the move to electronic submission immediately, scanning and capture is outsourced to a scanning bureau operator in Australia and New Zealand.

To accelerate the transition from paper invoices to fully electronic ones, Basware offers its customers supplier activation services with the aim to enable as many suppliers as possible to send their invoice in electronic format. For this purpose Basware has developed a number of different e-invoice sender solutions.

A supplier can submit invoices as PDFs via the secure portal, and Basware Connectivity delivers up the PDF image and XML data which can be matched to a Purchase Order in the organisation's ERP system and automatically transferred to the A/P system.

Suppliers can choose to send PDF invoices or install a virtual printer that sends directly via Basware Connectivity, which has seen strong adoption in the US and Europe and now represents 10% of Basware's total revenues.
Global companies operating in Australia are also looking to add electronic invoicing capabilities,” says Richard Farrell, Director of Bernet, an Australian based Basware Solution Partner.

A major Bernet client operating globally and already using the Basware Invoice Automation solution is adding electronic invoices to the range of methods it utilises to bring creditor invoices into its Basware solution. XML based invoices will be imported into the Basware solution and invoice status information sent back to the creditor.

This feedback closes the loop between source and destination AP departments, by providing quick updates regarding where the creditor’s invoice is in the processing cycle of the destination AP department. This feedback greatly reduces the flow of phone calls and emails between AP departments chasing invoice information. Payment details are also included in this status information.

Esker on Demand Accounts Receivable Automation, is a cloud-based service which integrates seamlessly with any invoicing application (eg. SAP, Oracle, MS Dynamics, etc), to automate the formatting (if necessary), archiving and delivery of customer invoices regardless of media type (mail, fax or electronic invoicing).

Esker provides a customisable invoice exchange portal where organisations can automatically upload their customer invoices and provide a self-service to their end customers to view, download, receive and archive their invoices for up to 11 years. Invoices can be formatted as PDF, csv, EDI or XML and delivered or uploaded to other systems as required.

Christophe DuMonet, Managing Director of Esker Australia, said "There is a requirement by many European Governments for ‘trusted’ invoices. Esker delivers this via digital signatures on e-invoices, certified by a third party."

"In the UK, more than 4.4 billion invoices (paper and electronic) are sent yearly. The move to electronic invoicing (e-invoicing) makes financial sense, as the cost of processing paper invoices remains high.
"Since December 20, 2001 the electronic invoice can substitute the paper invoice as a legal document in all EU member countries, and the UK implemented the European Invoicing Directive in 2004."

This requires that an invoice’s authenticity, integrity and readability must be guaranteed during the entire storage period. An invoice must be stored in its original format, whether paper or electronic; and both the supplier and customer are required to store the invoice."

The European Directive states that both the supplier and the customer may outsource the storage function to a third party, but all legal obligations relating to the content, the storage and the invoice production remain with the supplier.

Ray Kitchingman, Managing Director of Victorian outsourcing bureau, Chandler, believes there a number of factors causing slow uptake of e-invoicing in the government sector in Australia and New Zealand, including the barrier presented by legacy systems in place at government agencies and suppliers.

Straight through processing (STP) should be the aim in e-invoicing to get greatest benefit but legacy systems hamper this," he said

"Electronic invoicing requires conversion, via scanning, to get key data, and a standard must be imposed on what is required and in what format.

"My view is that we are in the infancy phase (creating & implementing technologies to convert legacy paper & electronic documents into data ready for processing), this is effectively double handling, or it could be described as the migration phase.

"E-invoicing needs a conceptual framework completed by the Government, whereby businesses know what they are working to and what requires to be done to get there. This will involve accounting standards, the ATO, and records management involvement.

Fuji-Xerox Australia sees supplier portals as a key element of an electronic deliver strategy, with functionality such as purchase order flips and data uploads becoming almost standard functionality in A/P solutions. Fuji Xerox is incorporating this functionality into its A/P, A/R and scanning services.

"As paper becomes a diminishing method of invoice delivery, the Australian market is likely to follow Europe where the scanning and capture is performed by specialist outsourcers," said Andy Stiddard, Senior Consultant for Global Services at Fuji Xerox.

"There is an acceptance that while the digitisation of paper documents is an extremely effective document management process, there is a lack of willingness to develop the aptitude and skills in-house to do this for a process that will continue to reduce in volume.

"There has been a similar move towards process improvements, SaaS and hardware investment where companies are looking to specialist experts to assist them in delivering digital solutions combined with expert consultant advice in their move towards best practice processes.

"Sustainability issues are another important driver," said Stiddard.

"While mandating electronic invoicing is a worthy initiative that is to be encouraged, this is not a straightforward decision. Fuji Xerox is conducting a joint review of current research that highlights that these wider environmental issues are complex. Studies have shown that a digital document is more carbon friendly under certain assumptions. However there are other variables to be considered such as the use of recycled paper, the recycling of the paper after digitisation and the environmental impact of using technology for accessing electronic documents.

"We are recommending to our customers that they make maximum use of our services via our centralised servers that are virtualised and utilised to their maximum capacity. Further environmental benefits can be gained through our services being accessed through the cloud.

"A further consideration is the use of remote capture of paper documents using software enabled and networked multi function devices. These will reduce the change management and environmental impacts of transporting or redirecting documents. These digitised paper documents will be hosted and incorporated with documents received electronically.

According to consultant Arin Ray of Celent, electronic invoicing in Asia is at a very nascent stage.

"This is due to a number of reasons, including lack of regulatory framework, lack of established standards, tax impediments, lack of government initiatives, and lack of proper understanding of the overall system among the participants in the trading chain. Volumes of electronic invoices exchanged in Asia come from the business-to-consumer segment, and few technically qualify as “electronic invoice.” B2B invoices electronically exchanged are just beginning to emerge. In Asian countries, attention and investments are far more focused on the “paperless trade”.

What is Electronic Invoicing?

•In Business-to-Business electronic invoicing, the invoice data is transferred with the invoice image from the Supplier’s invoicing/AR system directly to the Buyer’s financial/AP system electronically from end-to-end

•The buyer’s financial/AP system recognizes the electronic invoice and automatically books the invoice data into the financial/AP system without any human intervention

•The electronic invoice image is also graphically presented on a computer with similar appearance to a traditional paper invoice (typically as a .pdf or .tiff file)

•N.B. Electronic invoicing is not the same as e-mailing a .pdf invoice as an attachment (.pdf is only an image of the invoice, no invoice data is transferred)