From the September 2011 issue of Treasury & Risk magazine

Will Treasury’s Move Spur Adoption of E-Invoicing?

Department to eliminate paper invoices by 2013; estimates switch will cut its costs by 50%.

The U.S. Treasury plans to switch to electronic invoicing, a move that might accelerate the dawdling adoption of e-invoicing in this country.

Treasury announced last month that companies with which it does business must begin to submit electronic invoices by 2013. The department estimated the switch to e-invoicing will cut its invoice processing costs by 50%, saving it $7 million a year. Treasury also cited the advantages e-invoicing will provide vendors, including faster payment and the ability to check the status of invoices online.

Treasury isn’t the first government agency to shed paper invoices. According to Treasury, the Department of Defense has its own e-invoicing solution that handles more than 7 million invoices a year from more than 92,000 vendors, for annual savings of more than $250 million. Treasury and the Defense Department are working to develop a single government standard for vendors. Treasury estimated that if the entire federal government adopted e-invoicing, it could save $450 million a year.

Esa Tihilä, senior vice president of automation services at Basware, a Finland-based provider of purchase-to pay-solutions, says government efforts have increased the use of e-invoicing in Europe. He cites “strong recommendations,” for example, from Denmark, Finland and Sweden.

“We do see by experience that the government can influence market penetration by promoting the subject,” Tihilä says.

“The public sector is the only market player with the power to establish e-invoicing in the mass market,” says Bruno Koch, an e-invoicing analyst at consultancy Billentis in Switzerland.

But Scott Pezza, a senior research associate in financial management and GRC at Aberdeen Group in Boston, says that just because a company invoices one of its customers, like the Treasury, electronically doesn’t mean it will do so for all its customers.

Aberdeen surveys show 57% of big companies do some e-invoicing, but their level of use varies widely, he says. “All of these people are sending electronic invoices to some customers, but that hasn’t pushed them to all.”

And Treasury’s platform is a one-on-one solution, Pezza notes. “If they had adopted a network, something that could be expanded out—so the government is just one possible end point, but to submit, you’d have to get onto the network platform—there would be a greater possibility that you would expand usage.”

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