[EN] Keynote Exchange Summit: Integration of E-Invoicing Into The Existing IT Landscape | Dr. Ulrich

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PROJECT CONSULT Unternehmensberatung Dr. Ulrich Kampffmeyer GmbH

www.PROJECT-CONSULT.com© PROJECT CONSULT 2015

P.O. Box 20 25 55D-20218 Hamburg 1

Integration of E-Invoicing Into The Existing IT Landscape

Dr. Ulrich KampffmeyerOctober 5 to 6, 2015 | Barcelona, Spain

Exchange Summit

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The Integration of E-Invoicing Exchange Summit, October 5 to 6Dr. Urlcih Kampffmeyer 2

Agenda

Integration of E-Invoicing Into The Existing IT Landscape• Prologue

• The format is only part of the story• The German approach to e-invoicing:

the ZUGFeRD format• Processes and systems involved

• A process map• Creation and delivery of electronic invoices• Reception and processing of electronic invoices• Storing and managing electronic invoices

• Epilogue• Local, regional and global• The e-invoice – just the beginning

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Dr. Urlcih Kampffmeyer Exchange Summit, October 5 to 6The Integration of E-Invoicing

THE FORMAT IS ONLY PART OF THE STORY

1 PROLOGUE

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Prologue

The invoice is one of the most important documents in commercial life.

A no-brainer:With the increasing digitalization of communication and commercial life, the invoice must obviously also become digital and be supported by digital processes.

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Prologue

The goal of the standardization of electronic invoice exchange is the extensive automation of invoice generation and processing with a simultaneous decrease in cost and effort, while ensuring that electronic invoices are legally valid.

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Prologue

Discussion of electronic invoicing centers often only on questions of format and exchange.

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Prologue

Discussion of electronic invoicing centers often only on questions of format and exchange.

The technical format is irrelevant as long as all legally mandated information is complete and correct. You may use

• paper• e-mail• text file• data record• PDF• a.s.o.

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Prologue

The technical format is irrelevant as long as all legally mandated information is complete and correct. You may use• paper• e-mail• text file• data record• PDF• a.s.o.

Electronic invoices are sent through various channels:• EDI / X.400 messages• e-mail with attachment• download from portal• web via service provider • fax• a.s.o.

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Prologue

Electronic invoices are sent through various channels:• EDI / X.400 messages• e-mail with attachment• download from portal• web via service provider• fax• a.s.o.

Three major principles compete:• e-invoice direct delivery • e-invoice provision for download• e-invoice via service provider

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Prologue

Three major principles compete:

• Delivery i.E. by e-mail: not always reliablei.E. via service provider: controlled, but subjectto trust and service level

• Downloadi.E. from a portal: you can prove the receipt&• Hybrid

i.E. a message with the download link

These are crucial processes on the e-invoice process map.

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1 PROLOGUE EXCURSION

THE GERMAN APPROACH

Integration of electronic invoices into existing IT landscapes

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The German Approach

• The current discussion on electronic billing in Germany concentrates on a specific form of exchange of electronic invoices:• Transmission by e-mail, via portals or provided by

web services• Combined format made up of an XML data set and a

displayable document of the invoice, bundled in a PDF/A-3 container

• This is just one of the possible accepted type of an electronic invoice – but recommended in current legislation and tax regulations.

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ZUGFeRD

• German standard for electronic invoices: “ZUGFeRDZentraler User Guide des Forums elektronische Rechnung Deutschland”(central user guide of the Forum electronic Invoicing Germany)

• Version 1.0, March 2014• Issued by the association “FeRD

Forum elektronische Rechnung Deutschland”(Forum electronic Invoicing Germany)

• Consignment of standardized e-invoices as PDF with integrated XML data set for automated processing

• Complements EDI standards like EANCOM• Matches international standards and can be used in

European and international e-billing

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Positioning ZUGFeRD

Formats and provision of invoices:

Image file via e-mail

PDF-/text-/… file viae-mail

Web EDI EDIPaperr

ZUGFeRDPDF/A-3incl. XML

via e-mail

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ZUGFeRD

Machine-readable3 different XML schemaavailable, including international standards

Use caseAutomated processing

Eye-readableDocument(s)

Use caseManual processing

ContainerStandard ISO 19005-3 PDF/A-3

Use caseGlobal availibility of viewer andsuitable for retention/archiving

ZUGFeRD hybrid format

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Challenges for ZUGFeRD

• The current German XML schema is not completely compliant with the planned European standard, but• Core invoice attributes and model are included in ZUGFeRD XML• CEN MUG was source for ZUGFeRD-XML• UN/CEFACT XML CII (Cross Industry Invoice) is included in

ZUGFeRD-XML

• Special software is required to build an invoice object and to unpack the object at the receiving party• the current trend favours a simple XML format

• Three different processes needed for handling ZUGFeRD: (1) the PDF object,(2) the XML data, (3) the eye-readable document. But – which is the legally relevant part of the object to be retained as evidence record – 1, 2, 3 – or all? That depends …

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Status ZUGFeRD

Alliance for the hybrid format

• French/German co-operation on a hybrid format:Intervention to the EUMSF eInvoices AGS; dated Sep. 18, 2015.France and Germany are jointly working on the hybrid format standard since end of September, 2015.

• The German/French hybrid concept, based on the proposals of the national organisations FNFE (France) and FeRD (Germany),will be presented at the Governmental Meeting on Digitisation, Paris, Oct. 27, 2015.

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But:National - and even regional - standardization does not make sense in a globalized world.

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2 PROCESSES, AND THE SYSTEMS INVOLVED

Integration of electronic invoices into existing IT landscapes

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Electronic invoice exchange

Sender Recipient

generates

receives, processes &

… pays!

It looks quite simple

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What can happen?

The electronic invoice itself:

Simple Collective Pro forma

Annulation Corrected Copy

Various

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A Process Map

This main part of the presentation does not deal with the exchange and the different formats, but with the processes before the invoice is transmitted and after it is received.

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A Process Map

This main part of the presentation does not deal with the exchange and the different formats, but with the processes before the invoice is transmitted and after it is received.

Types of processing:• Manual processes• Manual / semi-automated processes• Automated processes

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A Process Map

Types of processing:• Manual processes• Manual / semi-automated processes• Automated processes

The different types address different user groups and different use cases:• Automated processing

• Large and midsize enterprises• Public sector organisations with high invoice volumes

• Manual (and semi-automated) processing• SME small size businesses• Consumers• Public sector organisations with low invoice volumes

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Types of processing:The different types address different user groups and different use cases:

Different focus of processes:• Direct or concerning the invoice and its processing

only• Indirect, supports working with the invoice and

includes related processes

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Type of process:• Direct or only concerning the invoice and its processing• Indirect, supports working with the invoice

Objective of processing:

Generation Reception Transmission Processing

Management

Retention

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A Process Map

The big question:

Who is the user?

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Complexity: everyone with anyone

S RSmall company

ManualWord processingAccounting software

FreelancerManual Word processingTax accountant

Medium-sized companyManualSemi-automatedAccounting software

Medium-sized companySemi-automatedERP

Large EnterpriseAutomatedfull scale ERP

CorporationSemi-automated and automatedMultiple ERP

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Complexity: everyone with anyone

S RSmall company

ManualWord processingAccounting software

FreelancerManual Word processingTax accountant

Medium-sized companyManualSemi-automatedAccounting software

Medium-sized companySemi-automatedERP

Large EnterpriseAutomatedfull scale ERP

CorporationSemi-automated and automatedMultiple ERP

+(retarded)

public sectororganizations

+service

providers

+consumers

+ + + + +

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A Process Map

The goal is preferably extensive and cost-effective automation …

• In a company or administration the accounting normally is homogenous and thoroughly organized.Electronic invoice exchange raises the problem of different formats, processes and systems mainly with the receiver of the invoice.

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Processes

Creation and delivery of electronic invoices

Major Processes• Initialization• Creation• Checking & releasing• Provision for delivery & transmission

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S The creator and sender

Typically, the creator and sender of an electronic invoice defines the form in which the e-invoice is delivered. The sender must consider:• Are the receivers prepared to receive e-invoices or

will they demand additional invoicing on paper? Or other format? Or other media? Or other channel?

• A company- and industry-specific invoicing software solution requires attention on the efforts for on-boarding business partners and even the reduction of suppliers.

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The context of the invoice is known to the creator:• Subject of invoicing• Receiver of invoice• Master data• a.s.o.

The surroundings are controlled:• Context• Invoice number• a.s.o.

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One-man shows and small companies

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One-man shows and small companies• Manual creation of invoicing, even word processor• Manual booking• Single delivery channel via e-mail• Repository of invoice in a simple file system• Archiving of accounting data and documents

(in-house or by a service company)

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One-man shows and small companies• Manual creation of invoicing, even word processor• Manual booking• Single delivery channel via e-mail• Repository of invoice in a simple file system• Archiving of accounting data and documents

(in-house or by a service company)

Integration into the IT application environment:• Invoicing templates for word processing;

subject on the interest and style of the sender• Automated output format for the accounting system;

dependent on the software vendor• Automated delivery and filing from the accounting

system; dependent on the software vendor

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Accounting E-mail

Text processing

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Medium-sized and large companies• Due to the variety of solutions and processes, we

can consider only examples here.

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Medium-sized and large companies

Direct invoicing processes • Manual or automated trigger for creation of invoice• Automated creation of invoices from accounting

data / ERP with configuration of invoice via master data, process data and case data

• Automated provision of invoice by• Push

Delivery of invoice (e-mail, X.400)• Pull

Delivery of notification that the invoice is ready to download (e-mail, SMS, social etc.)

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Different complexities of invoicing require different forms of integration:• Standardized off-the-shelf products and services

with general electronic order and transaction processes.• Invoicing is initiated by these processes and generally

doesn‘t require manual action.• Individual or specially configured services and

products that also involve individual accounting.• The invoice is generally initiated manually and typically

requires verification and approval processes; possibly even reconciliation processes with the invoice recipient.

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Indirect processes within the scope of invoicing• Manual examination of match with order, fullfillment

status and contractual conditions• Automated verification against master data and

case data, residing outside of the financial system, with which the invoice is created (i.E. project management system, stock management, time recording, CRM)

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Integration into the application environment• Primarily for the software creating the invoicing

• Creation of accounting records that use master data to create automated and parameterized invoices in the recipients’ required formats, ready for delivery/ provision and organized for filing

• This functionality is generally provided by the vendor/ systems integrator of the ERP, accounting or financial software

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Integration into the application environment• Secondary for the software used for handling and

processing the invoice outside the financial applications:• Notification of the responsible auditor with direct link to the

accounting records and any invoicing document that may already have been created that will be delivered to the recipient

• Notification of accounting records and documents, and release and annotation functionality; if necessary auditable

This functionality generally has to be provided via access authorization, inclusion of notification systems or separate workflow/ collaboration solutions.

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Medium-sized and big companies: internal

Accounting/ERP

CRMClient

Rechnung

Project managementService

Time tracking

contracts

Product Resource planning

Order database

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Medium-sized and big companies: output

Accounting/ERP E-Mail

Portal

SMS Notation

EDI / X.400

Master data

Converter

et al.

Data & document

Document

Data/document

Invoice

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Processes

Reception and processing of electronic invoices

Major Processes• Identification & Pre-Processing• Booking• Releasing• Post-processing for procurement

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R The recipient and processor

• Regardless of how and in what format invoices reach a recipient, they are basically processed in the same manner, with the same methods and with the same quality.(at least “should” be processed in this way)

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• Regardless of how and in what format invoices reach the company, they are basically processed in the same manner and in the same quality.

• The receiver is driven from the outside.• The receiver can seldom refuse receipt of an

electronic invoice.• Should the receiver use own solutions or portals for

electronic invoices, these must be equipped for the reception and processing of different external formats.

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• Regardless of how and in what format invoices reach a recipient, they are basically processed in the same manner, with the same method and in the same quality.

• First, the context of the invoice is only partially known:• Order• Delivery note/performance report• Master data• Contract• Sometimes, the invoicing and vendor history

• The necessary information for releasing and paying the invoice is gathered throughout a multi-step process involving different systems and even media gaps.

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It is of importance, wether (1) the invoice is

a) only structured data (i.E. EDI), b) data plus document (i.E. ZUGFeRD) as attachment of an e-mail; or c) document only (fax, scan, PDF attachment) via e-mail or download

(2) the invoice was already a digital original or if it was transferred by the recipient into an electronic format (i.E. scanned paper with OCR, classification and extraction of invoice data)

Processing (2) may relate to the processing of images, fax, pdf, a.s.o. with (1c)

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Already with the reception and interpretation of incoming invoices a bundle of different, interacting and even iterative sub-processes are involved, to prepare the invoice for further (automated) processing.The capture and preparation process should generate the same quality independently of the original medium of the invoice.

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One-man shows and small companies• Entry in the e-mail inbox as an e-mail with

attachment (fax as well)• Indirect reception in the e-mail inbox as a link to the

invoice download portal. Download to file system.• (Scanning of paper invoice)• Filing in special e-mail-folders, file system folder,

data registers and/ or document management system (and/ or even print) etc.

• Booking by own accounting staff or forwarding to a service provider for booking and processing

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One-man shows and small companies• Entry in the e-mail inbox as an e-mail with attachment (fax as well)• Indirect reception in the e-mail inbox as a link to the invoice download portal• (Scanning of paper invoice)• Filing in special e-mail-folders, file system folder, data registers and/ or document

management system (and/ or even print) etc.• Booking by own accounting staff or forwarding to a service provider for booking and

processing

Integration into the application environment is mainly an organizational issue, because…

• Entry is primarily by standard e-mail,• Booking is manual or through third parties,• Dedicated approval and release processes are rarely

necessary.

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E-mail Accounting

Download

FaxE-mailupload

Service provider

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Medium-sized and large companies• Due to the variety of solutions and processes, we

can consider only examples here.

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Reception and import• EDI

Automated reception, logging, transformation, validation, import to booking system, releasing, archiving.Manual processing only if inconsistencies or mistakes are recognized.

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Reception and import• EDI

Automated reception, logging, execution, validation, import to booking system, archiving.Manual processing only if inconsistencies or mistakes are found

• e-mail with attachmentif automatically recognized as invoice, directed to invoice capture process.Manual or partially automated processes.

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Reception and import• EDI• e-mail with attachment

if automatically recognized as invoice, directed to invoice capture process.Manual or partially automated processes.

• Paper invoiceScanning, quality and completeness check, OCR/ICR, classification, verification with existing master and process data, preparation for export to ERP and archive, automated or manual processing according to company practice

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Reception and import• EDI• E-mail with attachment• Paper invoice

Scanning, quality assurance, OCR/ICR/ classification, comparison with master data, automated or manual processing according to company practice

• Workflow-based invoice exchange(for example via portals with known partners or intelligent self-contained invoice objects): Automated reception of standardized data/documents, download, examination, verification, automated processing with import to the finance system

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Invoice processing: a classic process in two versions• Integrated

In the accounting/finance/ERP solution the verification and approval process is implemented with an internal, integrated workflow.The invoice transaction data set under examination is linked to the associated documents and these can be displayed through a viewer inside the financial application.

• AutonomousA separate software is used to link the documents under examination to the associated data and transfer the correct data to the accounting/ finance/ERP solution based on the result. The documents are kept in the separate system,

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Processing• For efficient automated invoice processing the

correct entry data, policies for processing (e.g. discounting, contract management et al.) and payment are necessary (in future direct e-payment).

• Documents are not required for the booking, accounting and payment processes, but are only linked as record to these transactions.

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Integration into application environment• Special software applications are necessary for EDI

processing. • With EDI invoice processing can be completely

automated. • Its use is limited to large companies and to industry-

specific solutions.

This raises the question for companies already using EDI: why do we need an other e-invoice format and process?

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Integration into application environment• EDI

• Capture systems for processing different types of information. Special systems are available for the invoice capture processing:• Scanning with OCR/ICR/classification, data extraction,

even recalculation• Interpretation of electronic invoice based on e-mail, word,

pdf or other formats with classification and data extraction

• Creation and provision of consistent in-house document and data formats for further processing

• Connection to mailbox systems, invoice approval and release applications and ERP systems

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Medium-sized and large companies: processing

Accounting/ERPE-mail

Portal

EDI / X.400

Master data

Invoice evaluation

Invoice approval

Document

Data/document

Document

Converter

Paper ScanQS

OCR/ICR

Dataet al.

Classification

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General Challenges for Automation

• Identifying the invoice being an invoice

• False and missing data:• VAT ID• VAT / reverse charge issues• Incomplete references• First time invoice submission of a new business partner• External identification and numbering systems

• Changes in identification, product or address data yet unknown to the ERP or master data systems

• Multilinguality

• Fraud

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Medium-sized and large companies: follow-up

Finance/ERP

Retention

Approval and release process

Analytics

Payment Transfere-Banking

Audit trails

Cashflow Management

Currency Management

et. al.Procurement

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Processes

Storing and managing electronic invoices

Major Processes• Archiving• Retention management• Auditing

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S & R Administration and retention

Invoices are subject to retention requirements. They are also subject to legal requirements.• Structured data

The management of bookings and transactions generally takes place in an accounting, finance or ERP system. These systems ensure correctness and compliance with software controls.As long as data subject to retention requirements is not migrated from this primary system, its correct retention is generally assured.

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Invoices are subject to retention requirements. They are also subject to legal requirements.• Booking and accounting data

• Evidence recordsIf booking data and evidence record are not identical (e.g. in EDI), the evidence record for a transaction must be retained and be permanently linked to the transaction data set (same index for both for retrieval and access purposes)

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• Booking and accounting data• Evidence records

• Evidence records and unstructured documents are often stored separately in a records management and/or auditable electronic archive system.The architecture differs depending on:• Access is possible only through the ERP system, which

manages the metadata and access pointers to the repository (HSM approach)

• Access is possible via an own database of the Records Management or Archive solution, independent of the ERP system, (integrated approach). This allows the use of archived data and documents by other systems, and the relief of the ERP from older unnecessary information.

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HSM & auditable archiving

HSMArchive

BPMCapture E-mailERP ERP et al.

Retention & Archiving

Retention managementonly via ERP, the index is part of the ERP database.

Retention and other services usable via all connected applications, since the archive has its own access, metadata, administration and retrieval information.

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What needs to be retained?• Data from accounting/ERP and other related

systems in machine-readable form• Evidence (documents, datasets) in direct accessible

form.If originally machine-readable, this ability must be preserved

• Context of the complete business transaction (this is much more than only the invoice and the invoice data)

• Audit trails of the processing and the retention operations

• Descriptions of systems, processes, operating procedures used

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Process security and auditabilityThe integration of electronic invoices into existing system landscapes often affects many systems, directly or indirectly.Two requirements need to be considered:• Consistent process security

This can be controlled and secured via appropriate process or workflow software.

• Consistent auditabilityThis can be secured through audit trails that record all process transactions concerning the invoice end to end.

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3 EPILOGUE

Integration of E-Invoicing Into The Existing IT Landscape

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Epilogue

Conclusions• Get rid of paper

• The process is more important than the format

• Automation is the key

• All finance and ERP software products MUST support electronic invoicing, generation and reception, both ways

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Epilogue

Local, regional and global• International business transactions require

international standards

• Government requirements cannot be the only measure for invoice standards, because public sector organisations act mainly on a national level

• Further legal harmonization is needed; i.E. retention criteria and periods, identification a.s.o.

• Get rid of old proprietary technologies

• e-invoicing is only the first step of business automation – lets go for procurement and other processes!

Logo 2 U n t e r n e h m e n s b e r a t u n gD r . U l r i c h K a m p f f m e y e r G m b H

PROJECT CONSULT

PROJECT CONSULT Unternehmensberatung Dr. Ulrich Kampffmeyer GmbH

P.O. Box 20 25 55D-20218 Hamburg

Have a great conference!

Dr. Ulrich KampffmeyerE-Mail: Ulrich.Kampffmeyer@PROJECT-CONSULT.com

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[EN] Keynote Exchange Summit: Integration of E-Invoicing Into The Existing IT Landscape | Dr. Ulrich

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