Glenbrook-TAWPI eInvoicing Perspectives NACHA Payments 2011

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
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
3
Background
BACKGROUND
4
Invoicing is just one component of the
financial supply chain
SUPPLIER
BUYER
Create
Purchase
Order
Create
Sales
Order
Generate
Invoice
Receive &
Deposit
Payment
Receive
Delivery
Invoice
Delivery
Apply
Payment &
Reconcile
Invoice
Receipt
Match &
Reconcile
Purchase
Process
Approve to
Pay
Invoice
Process
Pay
Payment
Process
5
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
e-Invoicing: Motivations
Supplier: Accounts Receivable
Buyer: Accounts Payable
• 
• 
• 
• 
• 
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
• 
• 
• 
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?”
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
6
Representative e-Invoicing Players
SUPPLIER
Generate
Invoice
Invoice
Delivery
Manual
Manual
Invoice
Receipt/
Scan
Match &
Reconcile
Approve to
Pay
BUYER
ReceivePay
Bank eInvoicing
SP/SMB
Distinctions
by size of
business
increasingly
blurry
Mid-market
Web 2.0 / SaaS Solutions
Bill.com
QuickBooks, Dynamics
Transcepta
Transactis
EBIDS
Incumbents: Sage, etc.
SaaS Solutions: NetSuite
EIPP: Bottomline,
Enterprise
Enterprise Billing Systems
ERP: SAP, Oracle
Procurement: Ariba
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
7
Invoices by Size of Business, U.S.
Supplier (A/R) Invoices & Bills Created (billions), 2007
Enterprise
Mid-Market
SMB
26.7
44.9
SP
Total
5.8
1.2
1.2
3.1
5-9
10-19
20-99
100-499
500+
1.1
million
2.2
million
6.9
million
32.8
million
450.9
million
2.0
4.9
Total
1.1
million
None
1-4
50
390
thousand thousand
Number of
Employees
Average revenue
per business
Source: US Census (2007), Glenbrook Analysis
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
8
Survey Methodology
AP: Buyer Perspective
AR: Supplier Perspective
• 
• 
• 
• 
• 
Survey Conducted June 2010
188 responses were received from the
IAPP, IARP, and TAWPI membership
Sponsored by Basware
Report published November 2010
• 
• 
Survey March-April 2011
(In progress!)
In depth interviews May-June 2011
Report pending
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
9
Buyer Perspective
BUYERS
10
Procure to Pay Process Flow
Procurement
AP
Supply Chain
Vendor
Master
Identify Need
to Buy
Generate
PO
Approve
PO
Place Order
Receive
Goods
Receive
Shipping
Manifest
Receive
Invoice
Three Way
Match
Reconcile
Initiate
Payment
Deliver
Remittance
Post AP
Monitor
Supplier
G/L
Three Way
Match
PO
Shipping
Manifest
Invoice
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
11
e-Invoicing: Key Features for Buyers
Buyer = Accounts Payable
• 
• 
Paper invoice SCANNING
–  Invoices received as paper must
be scanned
Electronic invoice RECEIPT
–  PDF
–  Fax
–  Email (either as attachment or in
body of email)
–  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
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
12
Businesses face a long tail of suppliers
The middle tier is stubbornly reliant on paper checks
EDI document exchange +
EFT or wire payment for most
important trading partners.
Exchange orders, invoices, and
payment data.
High
volume, high
frequency
Dominated by paper
checks mailed to large
& small suppliers that
are not willing/able to
accept ACH payment
or manage multiple
invoicing processes.
Regular
Suppliers
Occasional
Suppliers
Large enterprises push P-Cards for
smaller value purchases and one time
purchases; otherwise paper
checks dominate. Try to persuade
small suppliers to email, fax, or
upload/key invoices into website.
One-Time
Suppliers
~100
# Suppliers
1,000s
10,000s
13
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
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
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
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.
Identify the level of automation in
your invoice receipt process.
Manual data capture and
approval process
25.7%
16.6%
57.7%
Automated invoice data
capture, manual entry to
system of record
Automated invoice data
capture, automated entry to
system of record
15
Most Invoices Received via Mail
Buyers (A/P): How many of your incoming invoices are e-invoices?
100%
More than 61%
90%
80%
41% to 60%
70%
60%
20% to 40%
50%
40%
Less than 20%
30%
20%
0%
10%
0%
1-199
200-499
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
500-2,000
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%
Email
90%
80%
Scanning or workflow
software
70%
60%
File upload
50%
40%
PO flip (invoices
electronically generated
from purchase orders)
30%
20%
Electronic data interchange
10%
0%
1-199
200-499
500-2,000
Number of Employees
Over 2,000
N/A
Source: TAWPI / Glenbrook Analysis
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
17
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 email 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
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
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
0%
10 years ago
6-9 years ago
Less than 20%
20% to 40%
41% to 60%
3-5 years ago
2 years ago
More than
61%
Last year
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
19
AP Rationale for e-Invoicing
How important has each of the following reasons for
e-invoicing been to your organization?
Improves processes
Very
important
Improves accuracy
Lowers cost per invoice
Somewhat
important
Eliminates paper
Speeds up transactions
Not
important
Enables proper accounting at month-end
Improves relations with suppliers
Don't know
Has environmental benefits
Allows for globalization
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
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%
6-9 years ago
10 years ago
Longer
56%
45%
Last year
2 years ago
3-5 years ago
How long did your organization begin receiving e-invoices?
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
21
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%
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
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
Maybe
23.3%
No
60.5%
Not sure/not
applicable
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
23
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.
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
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 Learning curve
Lack of
Lack of
Resistance
Resistance
funding
that needs to management understanding from internal from AP team
be overcome
support
of the P2P
customers
process
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
Source: TAWPI (unpublished), Glenbrook Analysis
25
Supplier Reaction: Indifferent
What reaction have you received from
the majority of your suppliers?
3%
13%
Very favorable
Somewhat
favorable
35%
Neutral
49%
Negative
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
26
Supplier Perspective
SUPPLIERS
27
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
Email PDF (as attachment)
Email 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
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
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
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
Requirements Driven by Nature of Business
Selling Goods
Selling Services
• 
• 
• 
• 
• 
• 
• 
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
• 
• 
• 
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
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
31
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
–  Email
–  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)
Very much
Somewhat
Not at all
Improved audit and compliance
Increased centralization
Enhanced ability to offer early pay discounts and accelerate
Greater invoice accuracy
Improved employee morale with AR and collections
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
33
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
B2B Supplier Networks
1000
Bubble Size =
Number of
Suppliers
Transaction Value ($ billions)
• 
Syncada
(PowerTrack)
20,000
100
Citi Procure to Pay
185,000
Bottomline
100,000
10
Direct Insight
60,000
1
OB10
60,000
ADP P2P
14,000
JPMorgan
470,000
iPayables
45,000
1
10
Ariba
185,000
100
1000
Buyers
© Glenbrook Partners, 2011
Note: log scale
Source: Paystream (2009)
34
Supplier Reaction to B2B Networks
Add complexity to supplier’s business processes
Standard
invoicing &
payment
process.
SUPPLIER
Non-standard,
exception
processes for
supplier
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
BUYER
BUYER
BUYER
BUYER
BUYER
BUYER
BUYER
BUYER
BUYER
BUYER
BUYER
BUYER
BUYER
BUYER
B2B
Network
A
B2B
Network
B
Buyer’s
Own
Portal
BUYER
BUYER
BUYER
B2B
Network
C
BUYER
BUYER
35
e-Invoicing in Europe: it works better
Significant Variation by Country
Over All
Poland
Slovakia
RECEIVING
SENDING
Sweden
Czech Republic
Norway
Romania
Russia
Hungary
Lithuania
Latvia
Finland
Austria
Germany
Denmark
Estonia
United Kingdom
Source: Itella 2010, Glenbrook Analysis
36
Summary & Looking Ahead
SUMMARY AND LOOKING
AHEAD
37
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
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
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
Buyer
• 
• 
• 
If not mailed, more likely than not
delivered as PDF via email
Or a link to website where invoice
detail can be viewed or PDF
downloaded
Challenge:
Efficient, cost
effective delivery
• 
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
Opportunity:
utility that
feeds A/P
solutions
Challenge:
Ability to extract
meaningful
invoice data
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
39
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.
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011
40
Mark Brousseau
VP Research & Business Development
Erin McCune
Partner
IAPP-IARP-TAWPI
[email protected]
(717) 767-2574
Twitter: @markbrousseau
Glenbrook Partners, LLC
[email protected]
(415) 484-2330
Twitter: @erinmccune
Contact Erin or Mark directly with additional questions
Send an email to [email protected] to request a copy of these slides.
© Glenbrook Partners and IAPP, IARP, and TAWPI, 2011