E invoicing, models integration level and benefits

www.osservatori.net

Electronic invoicing: models, integration level and benefits

Conference Conference –– Electronic Invoicing in EuropeElectronic Invoicing in Europe

Madrid Madrid -- 2727thth April 2010April 2010

Alessandro Perego Alessandro Perego Politecnico di MilanoPolitecnico di Milano School of ManagementSchool of Management

www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits

ICT & Management Observatories Observatory on eInvoicing and Dematerialization

ICT & ICT & Management Management ObservatoriesObservatories

q31 ObservatoriesqMore than 60 individuals involved

(researchers + staff)qOver 3,000 companies analyzed

(by both case studies and surveys)q87,000 unique contacts on CRM databaseq2 newsletters: Knowledge (approx. 20,000

members); “PMI” (approx. 30,000 members)

“Spin-off” of the B2b Observatory, analyzing the impact of ICT on customer-supplier relationships since 2001

Identify and assess real potential of solutions in terms of Value Value creationcreation for user companies

OriginOrigin

Main objectiveMain objective

Deeply analyze themes related to electronic invoicingelectronic invoicing and more in general the integration andintegration and dematerializationdematerialization of company processes

MissionMission

Observatory on eInvoicing and DematerializationObservatory on eInvoicing and Dematerialization


Cliente

Fornitore

Alli

neam

ento

dat

i

Consegna PagamentoFatturazioneOrdine

SistemaBancario

The new perspective: electronic invoicing as “a competitiveness lever”

Electronic invoicing is not first and foremost a question of compliance with fiscal rules and regulations…

Value

Benefits

Technology

Change management

Contracts

Standards

Costs

Legal constraints

Rules & regulations

Viewed mainly as a set of Viewed mainly as a set of rules & regulations,rules & regulations,standards, standards, constraints, constraints, and costsand costs


Value

Benefits

Technology

Change management

Contracts

Standards

Costs

Legal constraints

Rules & regulations

Viewed mainly as a set Viewed mainly as a set of rules & regulations,of rules & regulations,standards, standards, constraints, constraints, and costsand costs

Cliente

Fornitore

Alli

neam

ento

dat

i

Consegna PagamentoFatturazioneOrdine

SistemaBancario

The new perspective: electronic invoicing as a “competitiveness lever”

Viewed as Viewed as true valuetrue valueConstraints

Technology

Rules & regulations

Costs

Standards

Contracts

Change management

Benefits

Understanding value

…but rather a tremendous opportunity to optimize both company andinter-company business processes


The mathematical model -The structure

Profitabilityassessment

model

Servicefruition mode

Adoptionparadigm +

Elementarycosts

Contextdata

Elementarytimes

Output

Effectivenessindexes

Profitabilityindexes

Investments

Currentcosts

BenefitsNon-conformity

Perfectcycle

View by player

We developed a mathematical model to assess costs, benefits and profitability ...and validated it with dozens of companies in many sectors


The scope of the analysisThe B2b trade process

Invoicing is the pivotal phase of a more extended process starting with business data alignment and ending with payment reconciliation

Customer

Banking System

Supplier

Order Delivery Invoice Payment

Dat

a al

ignm

ent


Storage of receivables – Electronic storage of invoices issued to clients, substituting paper storage in accordance with fiscal norms

Digitalisation and storage of payables - Electronic storage of invoices issued by suppliers, substituting paper storage in accordance with fiscal norms

Electronic invoicing – Agreement between trade partners for the exchange of invoices generated, send and stored exclusively in electronic formatq Unstructured format: invoices are image files (TIFF, JPEG) and

cannot be directly alteredq Structured format: the invoices contain data able to be altered

through computer applications

The main adoption paradigms considered

Exchange of documents between clients and suppliers taking placein structured electronic formatq Integration of the order-to-invoice cycle – exchange of logistics-

trade cycle documentsq Integration of the invoice-to-payment cycle – exchange of

administrative-financial document cycleq Complete integration and dematerialization – integration of all

phases of the cycle + electronic invoicing

Full trade process integration

Electronic invoicing

Substitute archiving

Customer

Bankingsystem

Supplier


Dat

a al

ignm

ent

Customer

Bankingsystems

Supplier

Order Delivery PaymentInvoice

Dat

a al

ignm

ent

Customer

Banking System

Supplier

Dat

a al

ignm

ent

Delivery PaymentInvoiceOrder


From net benefits of 2-3 € per invoice – with less than one year as the average payback time – in the case of adoption of the substitute archiving solutions…

The benefitsThe models of substitute archiving

Accounts receivable archiving

• Gross benefits between 2.3 and 3.2 €/cycle• Net benefits: between 1 and 2 €/ cycle• Payback time: generally < 1 year• Source of benefit: space, transmission

Accounts payable digitalization and archiving

• Gross benefits between 1,6 and 2.4 €/ cycle• Net benefits : between 0.5 and 1.2 €/ cycle• Payback time : generally< 2 years• Source of benefit : space

Customer

Bankingsystem

Supplier


Dat

a al

ignm

ent


…to net benefits between 4 and 12 € per invoice in the case of VAT-compliant electronic invoicing…

The benefitsThe models of electronic invoicing VAT-compliant

Customer

Bankingsystems

Supplier

Order Delivery PaymentInvoice

Dat

a al

ignm

ent

Structured electronic invoicing

Un-structured electronic invoicing

• Gross benefits between 9 e 12 €/cycle• Net benefits : between 5.5 and 8.5 €/cycle• Payback time : generally< 1 year• Source of benefit : productivity of personnel

• Gross benefits : between 3.6 and 5 €/cycle• Net benefits : between 0.6 and 4 €/cycle• Payback time : generally< 2 years• Source of benefit : space, transmission


…to net benefits of up to 65 € per cycle in the case of the full integration of the trade process

The benefitsThe model of full integration and dematerialization

Customer

Banking System

Supplier

Dat

a al

ignm

ent

Delivery PaymentInvoiceOrder

Full integration of the trade process

• Gross benefits between 30 and 80 €/cycle• Net benefits : between 25 and 65 €/cycle• Payback time : generally< 1 year• Source of benefit : productivity of personnel


The super-additional ruleThe benefits related to the improvement in accuracy

0 10 20 30 40 60

Accounts payabledigitalisation and archiving

Accounts receivablearchiving

VAT-compliant electronic invoicing

Integration ofthe invoice-to-payment cycle

Integration ofthe order-to-invoice cycle

Integration of the order-to-payment cycle

Full integration of the trade process

50[€/cycle]

The choice of the most advantageous servicefruition mode for each scenario is considered

In collaboration with:Indicod-ECR

Consumer goods

Costs reduction of:Perfect cycle Non conformities

The super-additional rule is due mainly to the reduction in non-conformities coupled with the reduction in cost of the interfaceactivities between the phases (e.g. settlements)


The “maximum” benefits in the different sectors can vary from 30 to 80 €/cycle and can represent from 1 al 3% of turnover

The benefitsSpecific industry differences

Initial accuracy of the projectInitial accuracy of the project

HighHighLowLow

Doc

umen

t ch

ain

effi

cien

cyD

ocum

ent

chai

n ef

fici

ency

Low

Low

Hig

hH

igh

Home appliances

Consumer goods

Pharmaceutical

Electrical equipment

Building materials

2.8%

1.7%

3%

0.6%

2.1%

-84%

-82%

-82%

-80%

-67%


Barriers toadoption

External

Internal

Regulatory confusion

Lack of standards

Poor awareness of value

Fragmentation of the order-to-payment cycle

Difficulty collaborating with “the Outside”

The barriersA classification of the perceived barriers

The barriers (actual or perceived) which hinder the spread of electronic invoicing and integration of the order cycle projects, can be traced back to 5 main types

Lack of clarity of the regulatory framework leads to a high perception of reacting in a “non-confirmative” manner

The difficulty in developing B2b integration projects, due to lack of interoperability tools

The obstacle preventing immediate consideration of the topic with the proper attention and perspective

The presence of parcelization both in the organisation as well as in the supporting information systems

The difficulty in collaborating with other companies – the competition or just suppliers, client and service providers

www.osservatori.net

Electronic invoicing: models, integration level and benefits

Conference Conference –– Electronic Invoicing in EuropeElectronic Invoicing in Europe

Madrid Madrid -- 2727thth April 2010April 2010

Alessandro Perego Alessandro Perego Politecnico di MilanoPolitecnico di Milano School of ManagementSchool of Management

E invoicing, models integration level and benefits

Business

Transcript of E invoicing, models integration level and benefits