The report tried to touch on just about every e-invoicing issue, leaving the focal message rather unclear for the reader.  Indeed, skimming the table of contents brought to mind that Fats Waller song that says “all that meat and no potatoes, just ain’t right.” So let’s add the potatoes.

The report lists several recommendations / issues for its future work.  They are:

1. The need to focus on making e-invoicing a mass-market application for the small-to-medium sized enterprise market.
2. The need to provide clarity with respect to national legislation regarding e-invoicing.
3. The call for an interconnected “e-invoicing ecosystem” where multiple e-invoice operators and other service providers are to interoperate and route traffic between each other – similar to how it’s done in mobile phone communications
4. The suggestion to begin the adoption of a single e-invoice content standard (UNCEFACT Cross-industry invoice) to provide a level playing field for all parties relying on the so-called e-invoice data file for automated invoice generation and processing.
5. The call for an EU-level organization or “organizational process” to implement the suggested changes, and the call for a set of campaigns to disseminate those key messages in order to enable a transition from the current e-invoicing landscape into the level playing field mentioned above.

One additional nugget in the report is the call to abandon the current practice of having e-invoices signed with a qualified digital signature in favor of an “equal treatment of e-invoices with respect to the handling of paper invoices”.  (See R 2.1 and R 2.2 in the report and Page 30.)

At Basware we welcome these recommendations.  Already, today our offering is compatible with the statements in the TOC report. 

However convergence to a single e-invoice data file format remains a long-term dream.  Basware takes a more realistic stance in the sense that we are accommodating both the senders’ as well as the recipients’ demands by providing a controlled conversion process enabling each customer to use their preferred format. 
 
Digital signing of e-invoices can be perceived as a nuisance or as a blessing for proving that files have not been manipulated. At Basware we take a neutral stance. We have both experience in countries where digital signing is a must and in others where there is a preference for reliance on other IT-controls to ensure authentication and e-invoice integrity.

Overall, the report leaves me feeling that all the ingredients are on the table and just waiting for the right cook to come along and make a tasty and balanced meal out of it all.

If you feel like giving it a go, try these:
http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&doc_id=5544 (Final report)
http://www.e-invoice-gateway.net/start/  (Portal page)
http://www.e-invoice-gateway.net/knowledgebase/countryrelated/ (Country-by-country comparison)
http://e-invoice.basware.com/

And have a look at their E-invoice Gateway website that enables you to do a brief country-by-country comparison of e-invoicing-related legislation.  Though not yet comprehensive and clear enough for individual e-invoice sending or receiving parties, it is still a commendable effort.  Go ahead and try it out.

In almost all cases the research has uncovered some tensions between the functions, whatever the structural relationship:

‘The reason I don’t report into finance is that I had it written into my contract that I would report directly to the Board. I engineered them away’ [CPO]
‘The relationship is a bit fractious; they [procurement] lack the overview of the business, the bigger picture. They sometimes are a bit slow at picking up the quality/cost relationship and how it doesn’t save us money to cut, cut, and cut’ [CFO]
‘We understand the suppliers in more detail and more intimately than finance’ [CPO]

What we found from our cost of control study is that no matter what the model, (see the diagram below for the different models currently in use) they all seem to share the same issues, although from the CPO perspective, there is a strong preference to bypass finance and report directly to the board.

(A) Procurement reports to finance with Board visibility
(B) Procurement reports to finance with no Board access / visibility
(C) Procurement bypasses finance with direct board report

A number of recurring issues erode the relationship between CPOs and CFOs, but encouragingly, these do cause regret on both sides – finance and procurement professionals see benefits in removing the tensions. The tensions primarily cluster around the areas of ownership, authority and transparency. Participants in the study often referred to lack of clarity in terms of who ultimately is in charge and similarly a distinct misunderstanding or disagreement on occasions about who should be in charge.

Both finance and procurement professionals must share some blame and undertake to remove such communication barriers that not only stand in the way of improved financial results, but have proved to be potentially fatal to many companies over recent months. Beyond perhaps an MBA qualification, CFOs and CPOs come from different worlds and have evolved differing languages. This has to change. The time has come for procurement professionals to express their requirements clearly in board-level language, to highlight what they know and how their department can leverage the supply chain for the sustained well-being of the company. Conversely, CFOs should recognise that robust businesses have been forged through blood, sweat and tears from the ground-up. Companies that are built upon solid supply chain operations and where collaboration between finance and procurement is close, have been performing consistently well during the good years, but come into their own when times get tough. They have weathered the economic storm better, and are emerging as leaders when conditions improve.

Both job functions can also be hindered and slowed in their effectiveness by the right information not being available when it is needed. The perception is that from both sides better information and systems would improve obstacles and bottlenecks. What is evident is that where data is captured in a systemic way and is available to all relevant parties in both functions the quantity of ad hoc communication goes down while the quality goes up. It is interesting to note that in some responses, finance and purchasing professionals referenced technology as a means of overcoming integration challenges, or facilitating more constructive ongoing operational relationships. However, this is subject to overall organisational frameworks and that of the relationship between the CFO controllers of the corporate purse strings and the CPO gatekeepers to the external supply chain.

So we are looking to open up debate between professionals of these two crucial areas. The opportunities to work with supply chains to transform businesses for years to come need to be set against the negative realities of supply chain risk. In the wake of recent economic events, we expect such debate to continue shaping the role of procurement and supply chain management at a corporate strategy level. With this in mind, we anticipate that there are two areas of focus for best practice discussions in the field:

1. Organizations accessing the improved costs, delivery, quality and service dimensions that improved supply chain dynamics present, and
2. Exposing organizations to increased risk of permanent or intermittent failure in the supply lines.

CPOs should make the most of this window of opportunity of ‘supply enlightenment’ to clearly communicate at board level the further strategic benefits that can be attained through improved supply chain management. Across most sectors, there is a great deal more to supply chain management than simply identifying cost savings (such as improved quality, reliability, customer service and flexibility) and it is up to CPOs to make the rest of the corporation aware of this.

The downturn has shown CFOs the devastating impact of what can happen when an array of strategic, financial and operational risks change and converge. In a positive economic cycle the force of upward growth and expansion can anesthetise the pain of operational shortcomings. Difficult business environments for buying organizations are seen to have a knock on effect across lengthened supply chains, often corresponding to an increase in supply risk. For many businesses the hypothesis of supply chain collapse is becoming a much closer reality that threatens commercial operations.

Figure one: As CFO, which of the following would you say are the main priorities for you in the coming 12 months?

Furthermore, as can be seen from figure one, the economic downturn has seen companies focus all efforts on cost cutting in an attempt to survive, let alone thrive. Many CFOs see the primary responsibility of the procurement department in the current climate as reducing the costs of purchased goods, materials and services, and in turn procurement professionals are feeling the pressure.

With cost cutting having been a major focus for the last 6-12 months, the question arises of how much extra cost can realistically be squeezed out of businesses if tired methods of identifying and realizing cost savings continue to be employed? Furthermore, focusing wholeheartedly on hasty cost cutting measures to the detriment of wider organizational imperatives may in fact weaken a company’s position. once a recovery begins.

Many of the challenges and priorities faced by CFOs boil down to procurement issues, yet it appears that the strategic relevance of purchasing is neglected in many scenarios. If purchasing was a window on the supply chain, it would seem that CFOs are looking elsewhere for signs of daylight among economic storm clouds. The need to combine forces and share information for the greater organizational good has never been more acute.

Usability and therefore adoption of a software tool is fundamental to not only short term success, i.e. the roll out phase, but also for the long term business plan as staff acceptance enables companies to progress along its technology for business journey. First impressions count- the look and feel is vital. A bad design repels the user – so there is a need to immediately understand what you are supposed to do without any messy help functions or manuals.

It’s really interesting to see how users familiarise themselves with the Basware system and how it fits into one of the easier software tools to use. As is best practice, we use user-centred-design and heuristic evaluations to develop our user interface, and really encourage feedback from the customers and end users, as they are two groups with different requirements- to make it as intuitive and as user friendly as possible.

User experiences must also bear in mind differing needs and cultural perspectives. For example, for color-blind users, you cannot only use red and green colors: the shapes of the icons must also convey their meaning. Similarly, symbols can cause problems in localization. For example the Western representation of the house referring to a “Home Page”, or a letterbox to “Mail” can be misleading. In many countries houses and mailboxes don’t look the same.

Our feedback suggests it is working; Finnair for example, suggests that their users of our system find it very intuitive and easy-to-use. This has both short and long term benefits to the business. With a solution accepted by the end users and quite self explanatory, roll out can happen to subsidiaries without the need for specific training. And over the longer term, solutions that are also best for purpose within the eProcurement and invoice automation area, lead people more easily on the journey towards the integrated and business efficient EPP process. In summary, a roll out with easy user acceptance enables best practices so everyone does the right things AND in the right order so that the business benefits of the technology are realized!

This survey, commissioned by Basware in association with IESE Business School (Europe) and the Kelley School of Business (USA), explores how the relationship between finance and procurement functions is symptomatic of wider operational strengths and weaknesses and evaluates how the management of financial and procurement processes affects wider business performance.

The key findings of the Cost of Control survey, based on the views of 550 financial directors and CFOs from large enterprises around the world, can be summarised as follows:

Despite a high-risk economic climate, CFOs in organisations struggle to recognise the importance of closely managing supply chains through procurement

• Only 28% of respondents believe that procurement has a significant impact on financial risk exposure
• Risk analysis (39%), margins growth (39%) and other strategic goals are all sacrificed in place of bottom line cost reduction (64%) as a strategic priority

Finance underestimates the strategic value of purchasing and the supply chain to business performance

• 52% of financial decision makers consider purchasing is becoming a more strategic function, although 36% believe it is still largely administrative
• Only 27% of respondents describe procurement as a function that has a positive impact on enterprise growth

Businesses are experiencing efficiency gaps in data capture, automation and integration across purchasing and finance functions

• On average, only 42% of indirect spending is captured
• Only 50% of the processes supporting purchasing are automated
• Under half (46%) of CFOs consider that purchasing and finance functions are integrated effectively

Satisfaction with cost saving strategy is influenced by levels of process automation within businesses

• Businesses with highly automated* purchasing processes are more likely to consider that purchasing and finance have maximised savings in the past 12 months (68%) than those with lower levels of process automation [58%]
• Satisfaction of ‘delivering on cost saving targets’ increases from 37% in low automation businesses to 55% wit high automation businesses

* High automation – Businesses that stated the percentage of purchasing processes that are automated is above 50%. Low automation – Business that stated the percentage of purchasing processes that are automated is below 40%

Figure 1: Levels of data capture, automation and integration show room for improvement

We will be posting further updates on this research here on the blog, so please check back for more details. Alternatively, if you would like the full report, please click here to download the Cost of Control report.

Workflow and automation definitions are being confused, with scanning and workflow vendors appearing to claim to offer automation, which from my more Euro-centric view, they most certainly do not.

Invoice workflow manages invoice flow digitally, shifting the process from manual circulation. This typically means that you either use pre-defined or administrator-set rules on how the invoice is to circulate within the organisation. There is very little automation in the form of automatic notifications, escalation procedures and archiving. While workflow systems enable organisations to free up time that was previously spent on manually inputting data, they don’t fix the problems an organisation may have with processes. As a matter of fact, computerised workflow just speeds up the rate at which problems occur.

Automation, on the other hand, applies technology to the rules-driven design process that automates these circulation and approval procedures. This allows companies to work smarter and better, as well as letting them totally skip the manual phases.

The difference in terms of results to the customer between automation and automated workflow are significant. Let me give you an example:

Accounts payable (AP) organisation performance is often measured by the number of invoices they are handling for each AP person (=invoices per FTE per year (full time equivalent)). In early 2009 the Hackett group published a report defining the top AP departments which function at the level of about 35 000 invoices per FTE, with manual circulation replacing electronic workflow.

One of our UK clients, ADT & Tyco, recently introduced our invoice automation with matching invoices against contracts and orders – and they receive a good number of e-invoices! As a result of automation ADT & Tyco can now handle 70 000 invoices per FTE. 70 000 invoices per FTE meant that they were able to reduce the number of resources handling invoices from 40 to 6 people and save EUR 400 000 in the first year. By further increasing the percentage of e-invoices we have been able to help other customers to a level of about 130 000 invoices per FTE per year.

That’s a big difference, and, as a customer, I’d want to know what I’m getting when I’m being sold a so called automation solution, that may be in fact an automated workflow solution.

Winning a customer in the US, or anywhere else for that matter, should be based on the correct use of industry standard terms and, of course, customer proof points. A great testimonial proving measurable business benefits makes so much more impact than a vendor telling a prospect just how awesome their offering is!

To kick start a shared services centre, the journey typically begins with the finance functions, and then moves to procurement side and maybe onto HR. But for each decision to use shared services center the most important phase to ensure success, is the starting point. So let’s begin at the beginning!

A thorough assessment of the processes, people and tools is critical for the long term success and it’s important to select the processes and tools before building the organizational structures around them. If this isn’t done, processes can get muddied very easily and the environment ends up far from ideal. In addition, choosing the right KPIs for the organization is essential so that there is room for continuous improvement and optimization of the processes once the centre is up and running. Even if you consider some key processes centralized, and so there isn’t anything more to do, think again. They may not be fit for purpose, particularly when looking at the KPIs required for a shared services solution.

For example, Metso, a global supplier of sustainable technology and services for mining, construction, energy, metal recycling and the pulp and paper industries, has worked closely with Basware to consolidate its invoice management into regional shared service centers. Alongside cost-savings and significantly reduced processing times, Metso have been able to steer the business towards more goal orientated purchasing. And the journey continues as they continue to work with their supplier base and extend out the productivity efficiencies and improve transactional relationships using the same best practice insight.

There is plenty to do when establishing a shared service center but just even focusing on a couple of key points some of the biggest time and cost consuming mistakes can be avoided:

1. Optimize processes or develop processes if there are none in place – document them!
2. Ensure the right people are in the right role, with the right processes and technology to support them and make sure people understand the roles and responsibilities
3. Provide the right tools which are easy to use, easy to roll out and useable for a multi language multi currency environment to aid customer adoption

For other tips on what NOT to do, see ssonetwork – there’s some great pointers here on preimplementation work, as well as looking at the required process throughout, and as the article states, moving towards shared services, it’s no walk in the park!

There were three key areas highlighted this year:

• Looking at the reach and interoperability of e-invoicing solutions across Europe
• Hearing about the progress of the EU working groups in providing a standard environment for e-invoicing across the 27 countries
• Discussing best practices communication in this market, to provide customers, prospects and supplier with the information they need to make sense of what is a fragmented and sometimes overly complicated legal environment.

It’s great to see the positive movement in these areas and hear how we’re all working to grow and inform the marketplace and most now seeing the need to get on board with other operators and create a more open, unified network to increase market penetration further. Based on the fast growth of our own transactions as well similar feedback from other operators, we can clearly claim that Europe is shifting to e-invoicing.

Apart from the obvious savings potential, the benefits of e-invoicing in terms of lowering invoice handling costs and improving internal processes are beginning to gain ground. It is was nice to notice that operators have finally found ways to justify the improvements in customer working capital and cash flow, shorter payments periods and usage of dynamic discounting. The effect of those often being far more important and greater to the customer than just the savings in the AP department.

Another thing I was glad to notice was the activity of the “southern” countries such as Italy, Spain and even more so, Central and South America, with Mexico, Chile and Brazil. Governmental activities in those countries have really been pro-e-invoicing, creating a platform for global companies to start e-invoicing also in those regions.

Even if enforcing standards still take a while – or the EU expert group results still take a year to complete – operators are ready to provide e-invoicing services across the globe.

So don’t hold back – the global interoperable invoice is already here!