Everything should come with an E

Greg Ford looks at harnessing the e-invoicing opportunities of the latest European e-procurement proposals

The European Commission (EC) has proposed that all public sector buyers across Europe should be required to carry out procurement electronically by mid-2016.This is expected to save billions of pounds annually.

Only five to 10 per cent of procurement processes are currently carried out electronically across Europe. So for all public bodies to rely on fully automated e-procurement by 2016 is a big ask and it cannot happen overnight, but it is a task that presents significant opportunities for software authors and resellers.

The cost and efficiency benefits of e-procurement can be significant.

With many public sector procurers and finance professionals laden with more work, often with fewer resources with which to do it, moving to automated procurement in one fell swoop is unrealistic.

Taking an incremental approach is therefore necessary. E-invoicing is the first phase.

Although some would argue that e-procurement and e-invoicing are distinct, e-procurement cannot be addressed without considering purchase invoicing. For instance, a public body could move to a streamlined electronic requisitioning, e-sourcing and e-tendering process and then find itself struggling to process purchase invoices and pay suppliers in a timely fashion.

This undoubtedly affects supplier relationships and, despite significant cost savings at the front end, costs will still leak from the back end of the process, as it were.

E-invoicing closes the e-procurement loop by automating the back-end management and processing of purchase invoices and supplier payments.

This needs to be one of the first considerations for public bodies that are looking to go down the e-procurement route and want to make savings without causing too much disruption.

Time-consuming administration can be replaced with value-adding activities. Slashing all the printing, photocopying, postage, paper-based authorisation and filing of purchase invoices, public bodies can save hundreds of thousands of pounds per annum. Late payment penalties can also be reduced.

Paper purchase invoices that arrive at the organisation can be scanned and turned into images.

Invoice data can then be extracted automatically and verified using an optical character recognition app before being uploaded to the finance system. A link to the invoice can be circulated automatically for authorisation via email and all e-invoices can be stored in a central, easily searchable archive, together with the associated purchase orders if available.

E-invoices can be paid electronically and the remittance advices automatically emailed to suppliers confirming these payments.

There is now a four-year timeframe to move public bodies from manual, disjointed invoicing systems to more streamlined and automated e-invoicing. Once that is done, the next phases of e-procurement can commence.

This is a significant opportunity.

Greg Ford is managing director of Version One