Posts Tagged ‘digital signature’

E-invoicing has not taken off as fast as its proponents might have hoped, but the economic climate might give their efforts new impetus.

The European Commission estimates that the potential cost savings of e-invoicing in the business-to-business sector will be €238 billion. The European Association for Corporate Treasurers puts the figure at €243 billion. According to Swiss-based consultancy Billentis, the unit costs of issuing paper-based invoices during the past year were in the range of ?8-18 (of which 40-50% could be saved by e-invoicing) and the unit costs of processing incoming paper-based invoices were in the range €11-32 (of which 60-90% could be saved). Given the current economic climate, such savings represent a very attractive proposition for corporates.

E-invoicing is also an attractive proposition for financial institutions, which have suffered huge losses and are focusing on transaction banking as a generator of fee income. The problem is that the area is bedevilled with challenges, including a lack of standards, a lack of definitions – and a lack of interest in some quarters.
The concept of e-invoicing has been around for many years. It aims to replace paper bills with electronic ones. Corporates can view invoices online, through a banking portal or other service and authorise them for payment. They can download invoices from the portal and automatically import them to their accounts payable or accounts receivable applications and archive them electronically to comply with statutory requirements.

What’s new about e-invoicing is that it is being linked with the single euro payments area. Because SEPA will standardise and harmonise payments processing across borders, it will significantly reduce the complexity of implementing e-invoicing solutions, according to SEPA: potential benefits at stake,  a report by Capgemini commissioned by the European Commission and published on the day SEPA came into effect in January 2008. Solutions will be more easily integrated into the back offices of sellers and buyers and because both sides of a transaction are using the same standards for payments processing, the challenges of compatibility between supplier and buyer will be greatly reduced. Moreover, “… the [Payment Services Directive] harmonises regulation and legislation, which lowers the barrier that regulation and legislation represent, though certain related barriers still remain (for example taxation)”, says the report.

Taxation is indeed a sticking point and is one that the EC is currently trying to fix. The EC’s VAT Directive has made matters worse, says Ifor Williams, sales director at Accountis, a developer of electronic invoicing, payment and document exchange services. Unsurprisingly for a European initiative, each country has chosen to interpret the Directive in its own way, leading to differences in tax treatment and invoicing standards. “The European Commission is aware of the problems with the VAT Directive and is working on revisions. Any revised directive shouldn’t differentiate in its treatment of paper and electronic invoices,” says Williams.

Antonella Vanara, payment systems marketing manager at Italian payments processor SIA-SSB, says pan-European interoperability of e-invoicing will require equal VAT treatment. “There are also obstacles to interoperability in the area of electronic signature standards. These standards are very complex and numerous – every country has its own. For example, in Italy, the digital signature must be issued by a qualified company that is accredited in Italy.”

According to a report from the Politecnico di Milano, basic standalone e-invoicing services are used by less than 1 company in 10 in Italy and the more integrated solutions are used by less than 1 in 30 companies.

As reported in Banking Technology’s Sibos Daily News in September 2008, Dutch/German payments processor Equens has teamed up with Italy’s ICBPI and Belgium’s Isabel in a joint electronic invoicing pilot that aims to establish an open, multiparty, cross-border e-invoicing network. Dave Rietveld, general manager for new business services at Equens, said it would take “a couple of years” before a European e-invoicing standard came into force and until that time local standards are well established and should be exploited. “It is too expensive for companies to invest in new standards, so our product bridges the current local standards, giving customers greater European reach.”

At present, pan-European e-invoicing is a concept, rather than a reality. However, advances have been made in national schemes, many of which could provide the basis of pan-European schemes once the interoperability problem has been ironed out. Public authorities are playing a role here, with the governments of Denmark, Italy, Spain and Finland mandating the use of e-invoices for business-to-government transactions. Says Vanara: “Some of the final features of the business to government sector have to be addressed, but once they have, this will be a real driver for e-invoicing in Italy, where current use is quite low.”

The Spanish government has driven the development of a legal framework for e-invoicing, a technical format and a website to help SMEs. SMEs are also able to obtain free software, attend events and get support, which totalled ?10 million in 2007 and ?43 million in 2008. By August 2009, all invoices sent to public administration bodies in Spain must be electronic.

In Finland, around 30% incoming and 40% of outgoing invoices are electronic. Unlike some other countries, Finland had not found the need for legislation to make this happen, Jere Reinikainen, a project manager at the State Treasury in Finland told the EXPP Summit in Frankfurt last September. Reinikainen said e-invoicing was considered a gateway product into e-government and e-business in general.

Bo Harald, chairman of the European Commission’s Expert Group on e-invoicing, says e-invoicing in Europe will be driven by the public sector because government authorities are the largest senders and receivers of invoices. “The Expert Group is very proud of the countries that have made a move to e-invoicing, but is also disappointed that more countries have not made such a commitment,” he says.

The Expert Group has been charged with developing a set of high level business requirements, which will cover the needs of all users and market participants; proposals to simplify the legal and regulatory framework for e-invoicing; and a vision for how the market could respond to user needs through network solutions supported by standards.

Nordic countries are quite advanced in their use of e-invoicing, says Gareth Lodge, a research director at financial industry analysts TowerGroup. “One of the reasons there are such high levels of EBPP and EIPP in the region is linked back to a banking crisis in the region about 12 years ago,” he says. “Banks had to shut hundreds of branches and one third of the industry’s workforce was laid off. But the banks still had to service customers, so they looked for other channels and this increased the reliance on electronic service delivery, which led to adoption of e-invoicing.”

Banks in the rest of Europe should take hold of the opportunities that will arise from the public sector, he says. “Most public authorities are required to deliver the best value to their clients, but the levels of investment to do this tends to be relatively low. They will be looking for a third party or a bank to help them introduce e-invoicing, so the question is, who will provide the best value in doing that?”

Accountis’ Williams says there is a good case for the banking network to be used for e-invoicing: “Invoices and purchase orders are just extra items in a business transaction that leads up to a payment being transacted. Banks are very good at handling payments, so the banking network should be used. E-invoicing is a very big opportunity for banks to gain extra transactional revenue that they don’t currently get.”

In June last year, The Royal Bank of Scotland announced it had signed a multi-year contract for Accountis’ electronic invoice presentment and payment technology, which it will use to provide VAT compliant e-invoicing services to corporate customers in the UK. The application provides detailed status information – such as proof of delivery, acceptance, query and approval status – for all documents involved in a business transaction, from purchase order to invoices. The service also provides real time dispute management.

Ian Watkinson, head of product innovation at RBS GTS UK, describes the services as a cheaper, faster and better way of processing invoices in a secure and VAT compliant manner. Among the first users of the service are local authorities, which says Watkinson, are aware that e-invoicing is an opportunity to deliver best practice and better value to tax payers. “E-invoicing helps local authorities to be more efficient and pay suppliers on time, which is a measure of how effective they are as organisations.”

Watkinson points up that in providing e-invoicing services, the bar should not be set “too high” for SMEs. Local authorities, for example, have a large and varied supplier base and therefore services should not be prohibitive for smaller, local suppliers he says, “In an accounts payable e-invoicing scenario, we don’t charge suppliers to register or connect to the service and we offer a range of connection options. If an SME can only print invoices, we have an option where we can capture the invoice print file before the document is printed, digitally sign the invoice and send it securely to the council. At the high end, large multinationals tend to generate their own format of data files reports out of their billing systems and they can securely connect their systems direct using the same service.”While e-invoicing has not developed as quickly as its proponents would want, there could be a silver lining to the cloud that is the global economic downturn. Says Watkinson: “Working capital management is very close to the hearts of suppliers today. E-invoicing services will help to improve how suppliers manage their days sales outstanding by providing them with the option to easily offer discounts on earlier payment terms. The service thereby facilitates the management of working capital, which is very important in this economic climate.”

Author: Heather McKenzie

Source: Bankingtech.com