The need for a Common Body of Definitions

An elaborate version of this article was published in FDE magazine (www.the-financedirector.com), issue 3, 2009

A CEO called out some months ago: ”With all the documents produced we tend to get the impression that e-invoicing has a large usage across Europe with a high adoption rate. But when we decided to implement e-invoicing in to our organisation we found out that all these documents present similar definitions and descriptions for different topics. And, even worse, also the other way around. And when each document is claiming to be the leading document, what should we believe is right? So we don’t what we are investing in and for how much, and therefore we are not going to invest.”

This true ‘story’ shows that almost everyone in the field of e-invoicing and invoice automation is using a different language when it comes to communicating or selling its product or services, regardless its professional background: banks, service provider, accountant, consultant. Of course the use of proprietary phrases underlines everyone’s ambition to sell its products and services. But it doesn‘t do any good. Instead, this singular approach scares potential customers from investing in e-invoicing and invoice automation. The customer feels like it will be a complex product with a high ‘IT-project’ factor including the risks, investments and delays attached.

Therefore we desperately need something we could call a ‘Common Body of Definitions’. Such a common body of definitions provides an easy level of understanding on definitions and its description. A common body of definitions should be a framework (DEFINITELY NOT YET ANOTHER STANDARDISATION EFFORT) in such a way that one identifies which phrases are best suited to use in communication and/or discussion et cetera, based on its description and context.

Such a body of definitions framework will surely assist the professionals to communicate in a more common perspective on -aspects of- e-invoicing and therefore help their consumers in deciding what they are investing in. A common body of definition effectively raises awareness by making e-invoicing a lot easier to comprehend (reducing the perception of complexity).

A first glance at a common body of definitions
So what should a framework for a common body of definitions look like?

STEP 1: Models
First of all we could start with the way e-invoicing is currently applied. These are the models of e-invoicing:

-Buyer direct
-Consolidator
-Direct processing
-Four corner
-Invoice processing
-Self billing
-Seller direct

And yes, these are by far (95%) the most used models when it comes to e-invoicing. And even at this ‘least detailed’ stage we can discover all kinds of other definitions en descriptions for these models. That is not wrong, nor right. But we should take in mind that every definition for a model has its context. This should be taken into account more than is being done up until now. Using (or even: developing) a proprietary models even in this stage should be done taking its context into account. Mind you: it is not bad, it just should be overlooked a bit more. A more in depth explanation on these models can be found here:

STEP 2: Processes
Now, each model is build upon several process steps that effectively takes the invoice from the sender’s administration to the receiver. This is where it becomes interesting. Underneath is a list of all the processes that are applied in all of the models. Each process is a building block that forms part of a model. For instance (enumerative):

-Authenticate
-Communicate
-Convert
-Create
-Credit management
-Dispute
-Download
-Enhancement
-Extracting
-Factoring
-Format
-Host
-Import
-Pay
-Present
-Print
-Receive
-Reconciliation
-Route
-Scanning
-Store
-Transport
-Validate
-VAT declaration
-VAT verification

Now, the relevance of a common body of definitions becomes apparent. For each and every process, a multitude of synonyms has been produced. This production rate has not decreased during the last few years. Instead, as the market for e-invoices grows (allegedly with 30%), the production rate of proprietary definitions for identical processes is ever more increasing. This development hampers a common level of understanding by those who have to invest: the customers.

STEP 3: Context
Thankfully this step helps somewhat with answering why a -proprietary- definition has been put into use. Step 3 determines the context (read: background) of a definition and/or phrase. The interest or background for using a particular definition or phrase could be contexts (read: backgrounds) like:

-Audit
-Business (including sales and marketing)
-Communication
-Data transfer
-Financial
-Fiscal
-Legal
-Organizational
-Policy/political
-Supply chain

Step 4: Technology
The last step determines in which layer(s) of technology a phrase or definition on e-invoicing and invoice automation has its impact. Based on the OSI model we can determine:

-Application
-Transaction
-Presentation
-Session/data flow
-Document format
-Transport/transaction
-Network/path control
-Data link
-Physical network

From a customers’ point of view it’s a hierarchical list: the lower the layer at which the phrase has its impact, the less interesting it is for a customer. And, having learned from customers, they are only slightly interested in the first three layers.

And now, our framework model looks like this:

Next generation recommendations
To achieve massive adoption of e-invoicing we should not try:

- to develop proprietary definitions and phrases
- to imagine that a standard will save the EU 243 billion Euro
- to push one model or standard into the domain of Financial Directors and their customers
- to disregard the power of the receiver when it comes to massive adoption of e-invoicing across Europe

Instead we should try to:

- develop a framework that enables every profession to understand what we are actually saying
- move to a mindset that e-invoicing is part of what is called networked economics
- embrace the receiver of an invoice in the belief that he is a key holder for savings on both sides.