Quantum Mechanics of Invoicing: Banks or B2B providers [part 2 of 2]

October 1, 2012  |  Electronic Invoicing

In our previous post, Nigel Taylor explained the relationship between quantum mechanics and the invoice. He explained that the “superposition” effect also plays its part in invoicing and e-invoicing. In this second and final episode Nigel Taylor investigates the invoice superpositions “banks or B2B” or “banks and B2B”. Download the original article here.

E-invoicing: Banks or B2B/Banks and B2B?

“Admittedly we are being light-hearted and not exactly describing an arrangement of particle fields and revolutionising the field of science in this article. But the principle of a superposition raises an interesting question when describing the status of an invoice during the O2P lifecycle.

An organisation wishing to move to e-invoicing is faced with a fragmented landscape. There are over 500 e-invoicing service providers in Europe alone. Ranging from banks, B2B and business process outsourcing companies, to venture capital funded start-ups, all claiming to offer the optimal e-invoicing solution. So how does an organisation choose which service provider best meets their needs?

What motivates an organisation to choose e-invoicing? Interestingly, the primary business driver is process efficiencies. This was recently verified by a GXS survey where the majority of respondents indicated that process improvement was their biggest driver, closely followed by the cost savings gained by removing paper from the process. An increasing trend is working capital optimisation, driven by SCF - both domestically and cross-border - either by leveraging a company’s own balance sheet, or by involving a third party such as a bank.

There are clear delineations between the PSC and FSC. Each is a specialised area subject to its own expertise, process standards, and regulations. A B2B service provider struggles with the financial regulations around lending and trade finance, and a bank struggles with the intimate knowledge of managing PSCs and bringing companies together through systems integration.

The theory of an invoice superposition is interesting. Does it mean that the invoice is in both the physical and financial worlds simultaneously? If your company is evaluating service providers, which vendor perspective is best suited to meet your requirements and deliver your objectives?

It can be argued that there are multiple crossover points within the PSCs and FSCs. For example, banks are beginning to offer pre-shipment finance based on mature electronic processes and new financial instruments such as the bank payment obligation (BPO). However, these are relatively new offerings and rely on the sharing of information across the PSC.

The reality of day-to-day PSC and FSC activities is that they are fundamentally different, but at the same time interwoven. To complete the physical process, suppliers must be paid and to ensure payment at the end of the financial process, the supply must be proven. The blurring of these lines has been driven primarily by the emergence of SCF models powered by electronic B2B communications. To acquire the data required to enable these new finance options, an intimate knowledge of end-to-end supply chain activities combined with system integration capabilities is essential, and this remains the domain of B2B companies.

If your company is evaluating the implementation of an e-invoicing solution combined with a SCF solution, then consider each of your potential partners’ strengths. If you truly wish to capture all the benefits of an automated PSC and PSC then consider the superposition and find providers that either work in both domains, or that can work together simultaneously.”

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